Depreciation refers to systematic allocation of asset’s cost over time. In other words, it is a non-cash- operating expense relating to reduction of value of tangible asset over time. An asset depreciate becasue of following reason:
Wear and Tear: Machinery being used in production process may depreciate because of the wear and tear which is possible with continued use of machinery for extended years.
Obsolence: A product may be considered as obsolete and hence is depreciated because there are new and better models available with better efficiency and improved production capacity.
As for the methods of depreciation, which client can consider are the following:
i) Straight Line Depreciation: It is the ...