Depreciation: Generally, depreciation means reduction in the value of an asset.
Depreciation is the amount written oil from the value of an asset during it’s useful life.
Meaning/Definitions:
1. William Pickles: A gradual and permanent reduction in the quality, quantity and value of an asset is called depreciation.
2. Carter: Depreciation is the gradual and permanent decrease In the value of an asset from any cause.
Characteristics of depreciation:
1. Revenue expense: Depreciation is a revenue expenditure. So it is debited to Profit and Loss Account.
2. Time: Depreciation is an expense associated with time.
3. Usage of asset: Depreciation is based on consumption along with time.
4. Fixed assets: Depreciation is to be calculated on fixed tangible assets of a business.
5. Useful value: Depreciation indicates continuous and permanent reduction in the useful value of assets.
6. Written off amount: Depreciation is not payable in cash, hence, the amount written off as depreciation during a year remains in the business.
7. At the end of an accounting year: Generally depreciation is calculated at the end of an accounting year.
8. Provision: Depreciation is one kind of provision.
