The word Depreciation has been derived from the Latin word Depretium which means decline in price or entertain. Depreciation relates to rigid pluss which loose esteem on floor of usage. Therefore Depreciation means decline in value of fixed assets on account of usage.
Depreciation may be defined as the permanent and continuing diminution in the quality, quantity or the value of an asset.William Pickles
Depreciation in the shrinkage in the value of an asset at a given date as compared with its value at a previous date.J.H. Burton
Facts about depreciation;
1.Depreciation is spark of the operating cost
2.It is a reduction in the value of an asset
3.The step-down in the value of an asset is due to its use, caused by break-dance out and tear or any other reason
4.The decrease in the value of an asset is gradual and continuous.
Causes of Depreciation:
1.Physical wear and tear
The well-nigh important fact that contributes to depreciation of an asset is the physical wear and tear resulting from its use. It reduces the future capacity of the asset to serve and its earning power. As a result, it reduces the value of an asset. A tangible asset physically deteriorates by wear and tear caused from vibration, friction, movement, strain, erosion etc.
In case of sanctioned age assets, the deterioration takes place with sheer passage of time. The assets are open to elemental forces of nature such as winds, weather etc.
Certain assets like patents, lease and licences, depreciate with the passage of time.
4.Fall in value due to demand fluctuations.
Sometimes, the demand for services provided by the assets may fluctuate which causes a fall in the value of an asset.
Depreciation may be caused on account of obsolescence. It may be due...
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