1. DEPRICIATION CONTENTS  WHAT IS DEPRICIATION  WHY WE PROVIDE DEPRICIATION  CAUSES OF DEPRICIATION  FACTORS INFLUENCING THE DEPRICIATION  METHODS FOR CALCULATING DEPRICIATION AMOUNT

2. WHAT IS DEPRICIATION  All assets whose benefit is derived for a long period of time, usually more than one year period are called as fixed assets.  These assets decrease in value year after year due to wear and tear or lapse of time. This reduction in value of fixed assets is called depreciation.  Depreciation is permanent and continuous decrease in the book value of fixed asset due to use, effluxion of time, obsolescence, expiration of legal rights or any other cause.

3. SOME STANDARD DEFINITION  In the word of Spicer and Pegler, “Depreciation is the measure of the exhaustion of the effective life of an asset from any cause during a given period”.  Carter defines depreciation as “the gradual and permanent decrease in the value of an asset from any cause”.  According to the ICMA terminology “Depreciation is the diminution in intrinsic value of asset due to use and/lapse of time.

4. WHY WE PROVIDE DEPRECIATION  To ascertain correct profit/loss  To ascertain the real cost of production  To comply with legal requirements  To replace assets

5. CAUSES OF DEPRECIATION CAUSES OF DEPRICIATION INTERNAL CAUSES WEAR AND TEAR DISUSE MAINTENANCE DEPLETION EXTERNAL CAUSES OBSOLESCENCE EFFLUXION OF TIME TIME FACTOR

6. FACTORS INFLUENCING THE DEPRECITION  Original cost of the asset – it implies the cost incurred on its acquisition, installation, commissioning, and for additions or improvements thereof which are of capital nature.  Estimated life – it implies the period over which an asset is expected to be used.  Residual value – it implies the value expected to be realized on its sale on the expiry of its useful life. This is otherwise known as scrap value or turn-in value

7. METHODS OF CALCULATING DEPRECITIAON  STRAIGHT LINE METHOD  DIMINISHING BALANCE METHOD  ANNUITY METHOD  DEPRECITION FUND METHOD  INSURANCE POLICY METHOD  REVALUATION METHOD