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Nidhipa Classes

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sushmanidhipa
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© © All Rights Reserved
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DEPRECIATION

June 5th 2023


Plan for the month of June:
 Completing Depreciation Chapter –
Section B – Accounting Part
 From Section – A – Financial Markets

Definition: The monetary value of an asset


decreases over time due to use, wear and tear
or obsolescence. This decrease is measured as
depreciation.
Features of Depreciation
Following are the 3 principal features of
depreciation:
 Depreciation is a decrease in the book
value of fixed assets.
 Depreciation involves loss of value of
assets due to the passage of time and
obsolescence.
 Depreciation is an ongoing process until
the end of the life of assets.
Causes of Depreciation
1. Wear and Tear due to Use or
Passage of Time: Wear and tear is nothing
but deterioration and the following
decrease in the value of an asset, resulting
from its use in business operations for
earning revenue.
2. Expiration of Legal Rights: Some
categories of assets lose their value after
the agreement directing their use in
business comes to an end after the expiry
of the predetermined period.
3. Obsolescence: Obsolescence is
another factor driving to the depreciation
of fixed assets. In common language,
obsolescence means being “out-of-date”.
Obsolescence refers to an actual asset
becoming outdated on account of the
availability of a better type of asset.
4. Abnormal Factors: Drop in the use of
the asset may be caused by abnormal
factors. Namely, accidents due to the
earthquake, fire, floods, etc., Accidental
loss is permanent but not continuing.

METHODS OF CALCULATING DEPRECIATION


1. STRAIGHT LINE METHOD – FIXED
METHOD (SLM)
2. WRITTEN DOWN METHOD –
FLUCTUATING METHOD – (WDM)
SYLLABUS COPY

1. Consignments Accounts
2. Partnership Accounts
3. Accounting for Non-Profit
Organization
4. Admission of Partner
5. Retirement and Death of Partner
6. Computerized Accounting System

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