Question

What is depreciation and different types of depreciation?

Answer 1

Depreciation is the reduction in value of a tangible fixed asset due to normal usage, wear and tear, new technology or unfavourable market conditions. Unlike amortization which does not have any subtypes, there are different types of depreciation methods.

Assets such as plants and machinery, buildings, vehicles, etc. which are expected to last more than one year, but not for infinity, are subject to this reduction. It is an allocation of the cost of a fixed asset in each accounting period during its expected time of use