why depreciation arises
Answers
Answer:
Depreciation is intended to roughly reflect the actual consumption of the underlying asset, so that the carrying amount of the asset has been reduced to its salvage value by the time its useful life is over. ... The causes of depreciation are: Wear and tear
Explanation:
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The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.
Machinery, equipment, currency are some examples of assets that are likely to depreciate over a specific period of time.
The main cause of depreciation is wear and tear caused by its usage.
Depreciation arises due to wear and tear of the asset because of its usage. Depreciation is an indirect cost and debited to profit & loss account and credited to the respective amount. Following entry will be passed:
Depreciation A/c Dr.
To Asset A/c
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