The Concept Of Depreciation is closely related to

the concept of Business Income. In the Income

generating process the long term assets tends to
consume their economic potential. The Economic
Potential so consumed represents the expired cost
of these assets and must be recovered from the
business. Depreciation may therefore be defined
as that portion of the cost of assets that is deducted from
revenue for asset’s services used in the operation of a
business.
 Wear and Tear
 Exhaustion
 Obsolescence
 Efflux Of Time
 Accidents
 Depletions
It Implies removal of an available but irreplaceable resource.
 Amortization

The Process of writing off intangible assets is termed as

amortization.
 Dilapidations

The term dilapidations refers to damage done to a building

or other property during tenancy.
 Ascertainment of True Profits.
 Presentation of True Financial Position.
 To Ascertain the True Cost Of Production.
 To Comply with Legal Requirements.
 Replacement of Assets.
 Original Cost Of The Asset.
 Scrap Value of the Asset.
 Estimated Life of the Asset.
 Straight Line Method
 Written Down Value Method
 Machine Hour Rate Method
 Sum of Years Digits Method
 Depreciation Fund Method
 Annuity Method
 Insurance Policy Method
 Depletion Method
 Provision for Depreciation Account is Maintained.
 Provision for Depreciation Account is not Maintained.
 From the Current Date
 From the Retrospective Effect.