Depreciation - Meaning and definition
The process of allocation of the relevant cost of a fixed asset over its
useful life is known as depreciation. It is an allocation of cost against the
benefit derived from a fixed asset during an accounting period.
According to Spicer and Pegler, “Depreciation is the measure of exhaustion of the effective life of an asset from any cause during a given period”.
According to R.N. Carter,
“Depreciation is the gradual and permanent decrease in the value of an asset from
Useful life is (a) the period
over which an asset is expected to be available for use by an enterprise; or
(b) the number of production or similar units expected to be obtained from the
asset by an enterprise.
Fixed assets which are meant for use in the business for more than one
accounting period, the cost of which can be written off over their useful life
are known as depreciable assets. Buildings, machinery, vehicles, furniture,
computers and equipment are examples of depreciable fixed assets. These assets
have limited useful life. They are meant for use in the business for production
or supply of goods or for administrative purposes. These are not meant for