Cause of depreciation are wears and tears effluxion of time fall in market price innovation exhausted or depletion eye is this true?
Answers
Following are the main causes of depreciation :
1. Physical wear and tear - When the fixed assets are put to use, the value of such assets may decrease. Such decrease in the value of assets is said to be due to physical wear and tear.
2. Within the passage of time - Whn the asssets are exposed to the forces of nature like weather, winds, rains, etc. the value of such assets may decrease even if they are not put to any use.
3. Changes in economic environment - The value of an asset may decrease due to decrease in the demand of the asset. The demand of the asset may decrease due to technological changes, changes in the habits of consumers etc.
4. Expiration of legal rights - When the use of an asset is governed by the time bound arrangement, the value of such assets may decrease with the passage of time.
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