Blog↗️ | Kids Website↗️

menu search
brightness_auto
more_vert

What is depreciation?

1 Answer

more_vert
 
verified
Best answer

Depreciation is derived from the Latin word “depretium” which means a decrease in the value of fixed assets due to wear & tear, the passage of time, and obsolescence.

 Example

The cost of the machine is Rs. 1,00,000 and its estimated life is 5 years.

To calculate the annual depreciation, you would divide the initial cost of the machine (Rs. 1,00,000) by its estimated life (5 years).

This gives you an annual depreciation expense – 1,00,000/5 = 20,000.   

 

Year 1

At the end of the first year, the machine value is – (1,00,000 – 20,000) = 80,000

 

Year 2

In the second year, the machine value is – (80,000 – 20,000) = 60,000.

 

Year 3

In the third year, the machine value is – (60,000 – 20,000) = 40,000.

 

Year 4

In the second year, the machine value is – (40,000 – 20,000) = 20,000

Year 5

In the last year, the machine value is – (20,000 – 20,000) = 0. 

Related questions

1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
1 answer
...