Depreciation charge
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A company has bought a truck 3 years ago at a cost of Rs.15,00,000 with an
expected life of ten years. Its current market value is estimated to be around Rs.
8,00,000. The estimated salvage value at the end of ten years is Rs. 75,000. The
company adopts Declining balance method of
books of account.
What will be the Depreciation charge for the seventh year?
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