Depreciation

Depreciation The loss of value over time of a tangible asset from use or obsolescence that accountants deduct from the book value of the asset, whether or not he asset actually depreciates. Depreciation accounting does not necessarily provide for additional cost of replacement or renewal. In straight – line depreciation the asset’s notional life divides the asset value in equal parts, i.e., for a 10 – year life the annual depreciation is 10%. In accelerated depreciation larger amounts are written off in the earlier years of an asset’s life, to enable the company to qualify for larger tax deductions at the initial stage, and invest in expansion and growth. The net block or the net fixed assets of a company is GROSS BLOCK less depreciation. The diminishing balance method of charging depreciation applies a fixed percentage of depreciation to the written down value, the percentage depending on the life expectancy of the asset. Se also DOUBLE – DECLINING BALANCE DEPRECIATION.

You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.

Powered by WordPress