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    Fawad Hassan
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    Depreciation is a non-cash expense that reduces the value of fixed assets like machinery, equipment, and buildings over time due to wear, age, or obsolescence. It affects the balance sheet and income statement. Determining depreciation involves considering the asset's cost, expected salvage value, useful life, and depreciation method. The straight-line depreciation method is the simplest, calculating expense as (cost - salvage value) divided by useful life each year until the asset reaches its salvage value.

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    Engg Economics lecture

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    Depreciation is a non-cash expense that reduces the value of fixed assets like machinery, equipment, and buildings over time due to wear, age, or obsolescence. It affects the balance sheet and income statement. Determining depreciation involves considering the asset's cost, expected salvage value, useful life, and depreciation method. The straight-line depreciation method is the simplest, calculating expense as (cost - salvage value) divided by useful life each year until the asset reaches its salvage value.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    Download as pptx, pdf, or txt
    20 views7 pages

    Depreciation

    Uploaded by

    Fawad Hassan
    Depreciation is a non-cash expense that reduces the value of fixed assets like machinery, equipment, and buildings over time due to wear, age, or obsolescence. It affects the balance sheet and income statement. Determining depreciation involves considering the asset's cost, expected salvage value, useful life, and depreciation method. The straight-line depreciation method is the simplest, calculating expense as (cost - salvage value) divided by useful life each year until the asset reaches its salvage value.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 7

    ENGINEERING ECONOMICS

    Lecture 10

    DEPRECIATION
    A noncash expense that reduces the value of an
    asset as a result of wear and tear, age, or
    obsolescence
    Fixed Assets machinery, plant, equipment,
    building etc.
    Effect on balance sheet and income statement

    CRITERIA IN DETERMINING
    DEPRECIATION
    cost of the asset,
    expectedsalvage value (residual value of the
    assets)
    estimated useful life of the asset, and
    a method of apportioning the cost over such life

    STRAIGHT LINE DEPRECIATION


    METHOD

    Simplest way of calculating depreciation expense


    Depreciation Expense =
    (Purchasing Cost Salvage Value) / Useful life
    Example: Cost = $ 2 million; Salvage value = $ 200,000
    Useful Life = 5 years
    Years

    Depreciation

    Book Value

    THANK YOU

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