Depreciation: is a measure Of the wearing out, consumption or other loss of value of a depreciable asset Arising from use, passing of time or obsolescence through technology and market Changes
Useful life:This is the time period over Which the company expects that the asset will be productive Depreciation is Recognized over the useful life of an asset.
Salvage value:Estimated value and of Asset's useful life when a company eventually disposes of an asset, it may be Able to sell it for some reduced amount, which is the salvage value
Book value:Remaining un depreciated investment Of those assets in year this value is recorded as in account books of company
Market value Mv:Amount realizable if asset Were sold on open market
Factors Affecting the Amount of Depreciation:
(1) The original cost of the asset.
(2) The useful life of the asset.
(3) Estimated scrap or residual value of the Asset at the end of its life. (4) Selecting an appropriate method of deprecia on.
The main causes lead to Depreciation:
obsolescence (functional, external oraesthetic)
Methods Of Depreciation
(1) Straight Line Method (SL)
(2) Constant Percentage Method
(3)sum Of year Digits Method (s.Y.D)
(4) Sinking Fund Method
(5) Declining Balance (DB)
(6) Double Declining Balance Method (DDB) The Following figure show the differences between three main methods (S.L D.B s Y D)