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Thanks a bunch, you saved my neck!!! Get a Price Type of paper: Please specify the deadline in advance, to have some time to review the paper. Contact Us Toll-free for US customers: Property, plant and equipment used in the business for production or for rendering services are utilized over a period of time, mostly for more than one accounting period. Value of such fixed assets decreases with passage of time and utilization. In order to ascertain correct income, a portion of the cost of fixed assets used in generating revenue must be charged to the revenue.
This portion of cost of fixed asset allocated to a particular accounting period is called depreciation. Depreciation has been defined as the diminution in the utility or value of an asset, due to natural wear and tear, exhaustion, effluxion of time, obsolescence or similar causes. Depreciation is allocated so as to charge a fair proportion of the depreciable amount in each accounting period during the expected life of the asset. Depreciation is calculated on all depreciable assets which can be defined as those which have a useful life for more than one accounting period but is limited and are held by an enterprise for use in the production or supply of goods and services.
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