Sunday, 20 March 2011
1)Depreciation:
2)Internal depreciation:
Depreciation which occurs for certain inherent normal causes, is known as internal depreciation. Such as wear and tear and depletion.3)External depreciation:
Depreciation caused by some external reason is called external depreciation. Such as obsolescence, efflux of time and accident.4)Wear and tear:
The change in the shape of an asset due to use in business is known as wear and tear.5)Depletion:
The decrease in the value of proportionate to the quantum of production e.g. mines, quarries, oil wells, forests etc.OR
Decrease in the value of wasting assets is called depletion.
6)Obsolescence:
The decrease in the value of an asset due to new invention, change in habit and taste of people, improvements is known as obsolescence.7)Fluctuation:
The decrease or increase in the market value of asset not due to use in business is known as fluctuation.8)Cost price of an asset:
It include all expenses involved in carrying and installing the asset to the site.9)Working life of an asset:
The period during which an asset will help earning income of business.10)Scrap value of an asset:
The price at which an asset will be sold at the end of its working life. It is also known residual value or break up value.11)Market price of an asset:
The price at which an asset can be sold in the market is called mark price.
12)Fixed installment method of depreciation:
Under this method depreciation of an asset will be equal in each accounting year.13)Reducing balance method:
Under this method depreciation is calculated on the book value of an asset.14)Amortization:
The decrease in the value of intangible asset such as patents, copy right, goodwill etc.15)Fixed assets:
Assets which have long life and which are bought for use for a long period of time are called fixed assetss. These are not bought for selling purpose e.g. land, building, machinery, furniture etc.16)Tangible assets:
Assets which have physical existence and which can be seen, touched and felt are called tangible assets e.g. building, machinery, furniture etc.17)Intangible assets:
Assets which have no physical existence and which cannot be seen, touched but can be felt are called intangible assets e.g. goodwill, patent right, trade mark etc.18)Wasting assets:
Assets whose value gradually reduces on account of use and finally exhausts completely are called wasting assets, e.g. mine, forests etc.0 Comments:
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