Glossary:


Term - D : Depreciation

Depreciation


Depreciation

A capital asset which may be a tangible asset such as a building or machinery or an intangible asset such as a patent has a definite useful life and a reduced residual value at the end that period. The decline in the value of the capital asset as it is consumed over time has to be accounted for as depreciation. To give a simplified example, if an asset is purchased for Rs 1,100/-, has a useful life of 10 years and worth Rs 100/- as scrap at the end that period, depreciation of Rs 100/- per year has to be provided for each year over the 10 year period.
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