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It is basically based on the principal "Wear and Tear". It means that when asset will be put to usage, it will lost its value.
Hence, Depreciation is the systematic allocation of teh value that an asset will loose (Depreciable value) throughout its usful life.
Depreciation is how much value an asset loses over time.
Depreciation means wear and tear of asset in the long run. All assets depreciate except for land & building whose value may apreciate due to prime location, nearness to metro railway and other factors. In acounting the easiest method of depreciation calculation is the straight line method . Here depreciated value of the asset is value of asset - srap value /no of years of life of theasset. A depreciation fund can be created over a period of time to purchase a new asset when the current one breaks down.
The reduction in value of an asset due to wear and tear or any other cause is known as depreciation. It is important to show depreciation in the books of accounts failing which the balance sheet would not display a true and fair financial position of business. Further, depreciation is also charged against the profit of the year on the premise that the asset was actually used to generate revenue in the financial year - so the value of depreciation should be charged against profit in order to arrive at the correct figure of profit or loss. there are a number of methods for calculation of depreciation which include (a) fixed instalment system or straight line method (b) reducing balance method or diminishing balance method, (c) revaluation method, etc.
Depreciation is tools in accunting systems to calculate and arrived the value of Equipment each year and update book of accunt
Depreciation is the reduction in value of asset due to wear and tear. Also the benefit from an asset is generated over a period of time.Hence the cost of asset is written off over its useful life to comply matching principle.
Depreciation is simply an allocation of depreciation cost (Cost of Asset-Scrap value) of an asset over its useful life.
Life may in years, production in units or or working hours depending upon the pattern of consumption.
depreciation we can simly say "decreasing the value of assets"
Depreciation is a non-cash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence over the period of its useful life.
An asset, say, a car or a machine, will never have the same value throughout its lifetime. As time passes, the asset loses value known as DEPRECIATION.
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