Depreciation And Sale Of Asset :: essays research papers

Depreciation is the decline in the approaching tense economic benefits of a depreciable non-current plus through wear and tear and obsolescence. It is an parcelling process. It can be calculated by two main methods, separately reflecting in a distinct prospect in the way the as brand is partd. Depreciation is to be treated as an estimated expense that does not set aside cash for the replacement of a non-current addition. In determining the constitute of acquisition of the lathes, any capital expenditure made must be added to the purchase price of the lathes. This amount will be considered as the diachronic address and will be used in calculating the disparagement expenseDepreciation is the allocation of the cost of a non-current asset less(prenominal) its estimated disposal rank against revenue all over the assets useful life. A depreciable asset is an asset that will be used over more than unrivaled accounting period and will gradually contribute to revenue over its u seful life. However, it will give rise to future expenses as their future economic benefits are used up or expired. Examples of depreciable assets include machinery and labor vehicles.Generally, most non-current assets, with the exception of land, decline in their potential to provide future economic benefit. There are three factors that contribute to this decline. They are, the deterioration of a non-current asset due to the use of it, technical obsolescence, whereby certain assets become extinct of date due to technical innovations and improvements on a comparative root and the final, commercial obsolescence which is the process of certain non-current assets becoming redundant as the demands nightfall for the goods or service previously provided by the assetDepreciation allocates the assets cost or depreciable amount over the estimated useful life of the asset to the entity. It is not a process of asset valuation. The cost of the asset less the salt away depreciation is not i ntended to give the current market value of the asset as the asset purchased is not intended for re-sale but use in the business. There are two methods of depreciating an asset, the straight-line method, and the reducing chemical equilibrium method. The straight-line method of depreciation allocates the same amount of depreciation expense creation charged against revenue each accounting period of the assets useful life. This method is effective for assets that give a constant contribution of revenue per period. It provides a direct relationship between the depreciation expense and the asset cost.