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Before we tell you more about depreciation and its method assignment help, let’s try to understand what depreciation is.
To run a business, assets are required but they may have fixed or estimated life. Value and performance of an asset may decrease every year and as such the decreased value is shown in the books of account. This decrease in the value of asset is called as depreciation. Depreciation may take place because of many reasons like a continuous use of asset, damage of an asset, depletion of asset or obsolescence of asset etc. The decrease in the value of natural resources, mineral reserves etc are depletion.
Depreciation of long-term asset is done by business for both tax and accounting purposes. There are few assets which are not depreciable such as land, property etc. Land and property are not considered to be depreciation asset as their life or use cannot be estimated. In fact, their value is supposed to be appreciated over the time.
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Factors considered while calculating depreciation:
1) Life of asset: Every business needs to estimate the life of the asset so that the value can be apportioned over the age of an asset.
2) Residual value: It is the value of the asset remained after it has been fully depreciated.
3) Depreciation method: There are different methods of depreciation and every business follows a certain method depending upon its requirement.
Different methods of depreciation:
- As discussed every business follows a pattern or method of depreciation as per its requirement. Below are few:
1) Straight line method
2) Unit production method
3) Sinking fund method
4) Reducing balance method
5) Annuity method
6) Revaluation method
7) Composite depreciation method
8) Sum of the years digits method
9) Depletion method etc
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