Question

Differentiate between depreciation and depreciation reserve fund on the basis of the time of utilization.

Answer 1

Answer:

Depreciation is the loss of value of fixed assets in use because of normal wear and tear, normal rate of accidental damages and expected or foreseen obsolescence. It is also called as consumption of fixed capital.

Because of depreciation, fixed assets are to be replaced after certain period. A provision of fund is required to meet the replacement cost of fixed assets. This is called depreciation reserve fund.

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Answer 2

Answer:

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