Arani
* causes of depreciation:
Depreciation is a ratable reduction in the carrying amount of a fixed asset. Depreciation is intended to roughly reflect the actual consumption of an underlying asset, so that the carrying amount of the asset has been greatly reduced by the time its useful life is over.
1. Wear And Tear wear and tear refer to a decline in the efficiency of asset due to its constant use. When an asset losses its efficiency, its value goes down and depreciation arises. This is true in case of tangible assets like plant and machinery, building, furniture, tools and equipment used in the factory.
2. Effusion Of Time
The value of asset may decrease due to the passage of time even if it is not in use. There are some intangible fixed assets like copyright, patent right, and lease hold premises which decrease its value as time elapse.
3. Exhaustion
An asset may loss its value because of exhaustion too. This is the case with wasting assets such as mines, quarries, oil-wells and forest-stand. On account of continuous extraction, a stage will come where mines and oil-wells get completely exhausted.
4. Obsolescence
Changes in fashion are external factors which are responsible for throwing out of assets even if those are in good condition. For example black and white televisions have become obsolete with the introduction of color TVs, the users have discarded black and white TVs although they are in good condition. Such as loss on account of new invention or changed fashions is termed as obsolescence.
5. Other Causes
Market value and accident of an asset are other causes of depreciation which decrease in the value of assets.
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Concepts of capital & revenue
* Capital and revenue expenditures
* Capital and revenue receipts
* Capital and revenue losses
* Capital and revenue profits
* Capital and revenue reserves
Capital Expenditures
The expenditures which generates revenue or income is called capital expenditure. Capital expenditure
Depreciation is a ratable reduction in the carrying amount of a fixed asset. Depreciation is intended to roughly reflect the actual consumption of an underlying asset, so that the carrying amount of the asset has been greatly reduced by the time its useful life is over.
1. Wear And Tear wear and tear refer to a decline in the efficiency of asset due to its constant use. When an asset losses its efficiency, its value goes down and depreciation arises. This is true in case of tangible assets like plant and machinery, building, furniture, tools and equipment used in the factory.
2. Effusion Of Time
The value of asset may decrease due to the passage of time even if it is not in use. There are some intangible fixed assets like copyright, patent right, and lease hold premises which decrease its value as time elapse.
3. Exhaustion
An asset may loss its value because of exhaustion too. This is the case with wasting assets such as mines, quarries, oil-wells and forest-stand. On account of continuous extraction, a stage will come where mines and oil-wells get completely exhausted.
4. Obsolescence
Changes in fashion are external factors which are responsible for throwing out of assets even if those are in good condition. For example black and white televisions have become obsolete with the introduction of color TVs, the users have discarded black and white TVs although they are in good condition. Such as loss on account of new invention or changed fashions is termed as obsolescence.
5. Other Causes
Market value and accident of an asset are other causes of depreciation which decrease in the value of assets.
.
Concepts of capital & revenue
* Capital and revenue expenditures
* Capital and revenue receipts
* Capital and revenue losses
* Capital and revenue profits
* Capital and revenue reserves
Capital Expenditures
The expenditures which generates revenue or income is called capital expenditure. Capital expenditure