ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The value of these assets decreases over time after their purchase because of wear and tear (i.e. use of the asset) and obsolescence. Depreciation represents the estimate for how much this value has declined in a given fiscal period.

Detailed explanation-2: -The term depreciation refers to an accounting method used to allocate the cost of a tangible or physical asset over its useful life. Depreciation represents how much of an asset’s value has been used. It allows companies to earn revenue from the assets they own by paying for them over a certain period of time.

Detailed explanation-3: -A depreciating asset is an asset that has a limited life expectancy (effective life) and can reasonably be expected to decline in value (depreciate) over the time it is used.

Detailed explanation-4: -Depreciation is the process of deducting the cost of a business asset over a long period of time, rather than over the course of one year. There are four main methods of depreciation: straight line, double declining, sum of the years’ digits and units of production.

Detailed explanation-5: -The depreciated cost is also known as the “salvage value, ” “net book value, ” or “adjusted cost basis."