1. Meaning of Depreciation
Depreciation is the reduction in the value of a fixed asset due to:
use
time
wear and tear
or becoming outdated
Example:
A mobile worth ₹20,000 today won’t have the same value after 1 year → this fall in value is
depreciation.
2. Causes of Depreciation
1. Wear and Tear – using the asset daily
2. Passage of Time – value reduces even if not used
3. Obsolescence – new technology makes old assets outdated
4. Accidents – sudden damage
5. Expiry – assets like patents expire after a period
3. Need / Objectives of Depreciation
To know the true profit of the business
Depreciation is the reduction in the value of a fixed asset due to:
use
time
wear and tear
or becoming outdated
Example:
A mobile worth ₹20,000 today won’t have the same value after 1 year → this fall in value is
depreciation.
2. Causes of Depreciation
1. Wear and Tear – using the asset daily
2. Passage of Time – value reduces even if not used
3. Obsolescence – new technology makes old assets outdated
4. Accidents – sudden damage
5. Expiry – assets like patents expire after a period
3. Need / Objectives of Depreciation
To know the true profit of the business
