Question

Depreciation is dependent on a number of estimates. When a change in an estimate is required, the change is made:

Answer 1

Depreciation is a charge to profit and loss accounts for the fall in the value of assets during each year of its use.

Any business organization is required to record the purchase of long-lasting substantial property and equipment as assets the financial records and to charge a portion of the cost of these items to each year I which they have a useful life.

This process is known as capitalizing and depreciation of fixed assets. Expense allowance made for wear and tear on an ASSET over its estimated useful life.

It is recognizing the decrease in the value of an asset due to age and use.