Nikhil Limited purchased a machine on 1st July, 2019 for 8, 90,000 and freight and transit insurance premium paid 25,000 and 15,000 respectively. Installation expenses were 40,000 and salvage value after 5 year will be 50,000. Under straight line method for the year ended 31st March, 2020 the amount of depreciation will be: 1,81,000 Next 1,35,750 1,38,000 1,84,000 L

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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.