**CONCEPT OF DEPRECIATION**

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**FIXED ASSETS**

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**MEANING AND DEFINITION OF DPRECIATION**

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**METHODS OF CALCULATING DEPRCIATION**

Depreciation Topics:

They include all assets whose benefit is derived by businessman for a long period of time, usually more than one year period, Examples : Machinery, Furniture, Buildings, Leases, etc. land is affixed asset but not subject to

It is common experience that whenever an asset is used it reduces in value. The net result of

According to Spicer and Pegler “

According to the Institute Of Chartered Accountants Of India, “

According to International Accounting Standards Committee, “

The following important terms from these definitions are important:

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• Realizable value at the end of useful life.

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1. Straight Line Method or Fixed Installment Method.

2. Written Down Value Method or Diminishing Balance Method.

3. Annuity Method.

4. Depreciation Fund Method.

5. Insurance Policy Method.

6. Revaluation Method.

Under this method, the same amount of

1. Amount of

2. Rate of

1. Simplicity: It is every simple and easy to understand.

2. Easy to calculate; It is easy to calculate the amount and rate of

3. Assets can be completely written off: Under this method, the book value of the asset become zero or equal to its scarp value at the expiry of its useful life.

Under this method,

1. Uniform effect on the profit and loss account of different years. The total charge (i.e..

2. Recognized by the income tax authorities: This method is recognized by the income tax authorities.

3. Logical Method: It is a logical method as the

The annuity method considers that the business besides loosing the original cost of the asset in terms of

Under this method, funds are mad available for the replacement of asset at the end of its useful life.th depreciation remains the same year after year and is changed to profit and loss account every year through the creation of

According to this method, an insurance policy is taken for the amount of the asset to be replaced. The amount of the policy is such that it is sufficient to replace the asset when it is worn out. A sum equal to the amount of

Under this method, the asset like loose tools are revalued at the end of the accounting period and the same is compared with the value of the asset at the beginning of the year. The difference is considered as

Under this method, the same amount of

1. Amount of

2. Rate of

1. Simplicity; It is very simple and easy to understand.

2. Easy to calculate; It is easy to calculate the amount and rate of

3. Assets can be completely written off; Under this method, the book value of the asset become Zero or equal to its scrap value at the expiry of its useful life.

The amount of

Under this method,

1. Uniform effect on the profit and loss account of different years. The total charge( i.e.…

2. Recognized by the income tax authorities; this method is recognized by the income tax authorities.

3. Logical Method: It is a logical method as the

It is very difficult to determine the rate by which the value of asset could be written down to zero.