Class - 11 Accountancy
Chapter 7 - Depreciation, Provisions and Reserves
Meaning:
Depreciation is a decline in the book value of depreciable assets due to wear
and tear, constant use and expiry of time during the estimated useful life of
the asset.
Causes of Depreciation:
1. By constant use.
2. By the expiry of time.
3. By accident.
4. By depletion.
5. By permanent fall in the market price.
Importance/need of providing depreciation:-
● For ascertaining the true profit or loss.
● For providing a true and fair view of the financial position.
● To ascertain the accurate cost of the product.
● To provide funds for the replacement of assets.
● For avoiding overpayment of income tax.
Factors determining the amount of Depreciation:-
1. The total cost of the asset.
2. The estimated useful life of assets.
3. Estimated scrap value.
Methods of providing or allocating depreciation:-
1. Straight-line method
2. Written down value method
Chapter 7 - Depreciation, Provisions and Reserves
Meaning:
Depreciation is a decline in the book value of depreciable assets due to wear
and tear, constant use and expiry of time during the estimated useful life of
the asset.
Causes of Depreciation:
1. By constant use.
2. By the expiry of time.
3. By accident.
4. By depletion.
5. By permanent fall in the market price.
Importance/need of providing depreciation:-
● For ascertaining the true profit or loss.
● For providing a true and fair view of the financial position.
● To ascertain the accurate cost of the product.
● To provide funds for the replacement of assets.
● For avoiding overpayment of income tax.
Factors determining the amount of Depreciation:-
1. The total cost of the asset.
2. The estimated useful life of assets.
3. Estimated scrap value.
Methods of providing or allocating depreciation:-
1. Straight-line method
2. Written down value method
