ACCOUNTS

BY NILESH SHARMA
 DEPRECIATION

It’s a method of allocating the cost of a tangible

asset over its useful life.

Reduction in the value of assets over the period

of time.

A permanent fall in the value of fixed assets

arising through wear and tear from the use of
those assets in business.
 OBJECTIVE
To calculate proper profits.

To show the asset at its reasonable value

To maintain the original monetary investment of the

asset intact.

Provision of depreciation results in some incidental

advantages also.

To provide for replacement of an asset.

Depreciation is permitted to be deducted from

profits for tax purposes.
METHODS OF DEPRECIATION

Depreciation

Reducing
Straight line
Balance
Method
method
 TANGIBLE ASSETS

• Value is based on
Tangible physical properties.
• Fixed assets are tangible
assets because they exist
Land physically.
• They are owned and
used by the business and
Building are not held for sale as
part of normal operations.

Machineries
 INTANGIBLE ASSETS

Intangible • Claim to the future

income generated
(ultimately) by tangible
Patents assets.
• An intangible asset is an
Trade names identifiable non-monetary
asset without physical
substance held for use in
Franchises the production or supply,
for rental to others, or for
Goodwill administrative purposes.

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