Depreciation, Objectives And Reasons

Depreciation is a reduction value or lost usefulness or expired utility or a permanent fall in the value of fixed assets arising through wear and tear from the utility of those assets in business and includes amortization of assets whose useful life is predetermined.Accounting procedure or process of converting the cost of fixed assets to expense is known as depreciation.It determines and presents the financial position and results of expectations of a firm.Accounting process of converting intangible assets to expenses if called amortization.
Main objectives of providing depreciation are to calculate proper profits, show the asset at its reasonable value.To maintain the original monetary investment of the asset intact and have some incidental advantages, provide for replacement of an asset and finally to have tax advantage.
Depreciation may happen due to two reasons internal and external reasons.Internal may be wear and tear, lack of proper maintenance, change in production format, restriction of production, reduction to demand of the product produced by the asset, technical progress, depletion and unuse of the same.
External Reason may be due to Obsolescence which is induced by new inventions, improvement, loss of demand due to change in fashion and effluxion of time.

Steps in measurement of depreciation include reduction of total depreciation, spreading it over the economic life of the asset.Depreciation depends on following factors total cost of asset which includes the invoice cost, less any cash discount, plus all costs essential to bring the useable condition.Estimated useful service life or economic life and its estimate residual value.Residual value is an estimated sale value of the asset at the end of its life to the business.Estimated residual value should be estimated after deducting the disposal and removal cost.Depreciation accounting deals with cost allocation and not with its valuation.
 

http://expertscolumn.com/content/market

http://expertscolumn.com/content/marginal-cost-costing

http://expertscolumn.com/content/quality-working-life-qwl
 

Article Written by manas

Pen is mightier than sword. It has always been and will be. Creative thoughts can be developed and circulated among the public to overall growth and development. Writing is the only way through which one can do the same. I have a deep inclination towards writing.


Post Your Comment

Related Articles

  • India - Federal System

    The Indian Constitution is primarily federal, having features essential for a federal system. In a unitary state there is only one government, namely the national government, in a federal state there are two governments the national or federal government and the government of each component unit. India as a federal system has a Central Government and State Governments.

  • Approaches To Marketing Study

    Marketing concept begins with a well-defined market, focuses on customer needs, coordinates all the marketing activities affecting customers or buyers, and makes profits by creating long-term customer relationships based on customer value and satisfaction. Customer focus and value are the path to sales and profits. Approaches to the study of marketing are many.

  • Channels Of Direct Marketing

    Direct marketing is an interactive marketing system that uses one or more advertising media to effect a measureable respond and or transaction at any location. Direct marketing is direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationship. Benefits of direct marketing are convenient and hassle free for consumer, saves time, offers a larger selection of products, gives opportunity of comparative shopping using main catalogs and online shopping services.

  • Role Of Computers In Training And Education

    Computers have been used in schools and colleges since the first apples were introduced in the seventies. Impact was limited because there were not enough of then and educational computer programming was poor.

    As technology improved, educational software has become a major influence at all levels from elementary schools to universities. Ability to connect computes and student together over the network such as the internet opened up fantastic educational opportunities. In colleges computers are increasingly being used to teach courses that any one would like to take.

  • Saraswati Temple - Osmania University

  • Does Money Rule The World?

    Some people always say that money is not important in their life. But, it is not so in today’s world. Without money everything comes to standstill. The society also respects a man who has enough wealth irrespective of his or her character. Money bonds the relationship better. A wealthy man has many friends. Without wealth everything becomes futile.

  • Essentials Of Questionnaire

    The framer or setter of the questionnaire must pay attention to the following points in constructing an appropriate and effective questionnaire or schedule:

    a) The framer must keep in view the problem he or she is to study for it provides the starting point for developing the questionnaire/schedule.  He or she must be clear about the various aspects of his problem to be dealt with in the course of his project.

  • Reasons For Killing Animals/Cutting Of Trees

    The fear of people about wild animals results in killing them. Hunting of wild animals for the sake of prestige and passion. To get money by selling the skins of lions, tigers, chitas, deers, crocodiles and snakes after killing them. Killing of elephants for the sake of their tusks. The decline in forest cover is also a reason for the decline in wild animals.

  • Margin Of Safety

    Margin of Safety  is the difference between actual sales minus break even sales.  It shows the amount by which sales revenue  can fall before a loss is incurred.  At breakeven point there is no profit, no loss, sales beyond the break even point represent margin of safety since any sales above the break even point will give some profit.   

  • Data Collection Through Mailing Questionnaire

    Collecting data by mailing questionnaire methods is quite popular, particularly in case of big enquiries. It is being adopted by private individuals, research workers, private and public organizations and even by Government organizations. In this method a questionnaire is sent usually by post to the persons concerned with a request to answer the questions and return the questionnaire.