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Depreciation is allotment of fixed assets cost to a time-period in which solutions are gained from an asset. The initial inception of Depreciation is torn and wear, depletion obsolesce, effluxion of time.
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Straight Line Procedure
This is one of the simplest methods of Depreciation from all. Each year a substantial cost is written off as Depreciation. The value comes by non-bearing the asset's original price by many years of reckoning life.
Annual Depreciation = Cost of the asset-Estimated Scrap value
Declining Balance Depreciation
Also called a reducing method of installment. The yearly charge for the Depreciation is premeditated by applying fixed costs to lessen the asset value. In the initial years, expenses of Depreciation are more considerable as compared to the later years. Commonly, this procedure is determined prudent as it counterbalances charges for Depreciation and repairs.
Entries Required Unveiling to be made on writing off Depreciation
To Asset A/c
The depreciation account goes to the debit of loss or profit account. The asset appears as it lessens value in the balance sheet. The other option of entry is:
To Provision for Depreciation A/c
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