Factors that contribute to depreciation of a Fixed asset are:
- Physical deterioration/Expected physical wear and tear.
- Obsolescence/Economic factors.
- Depletion (Natural resources such as mines)
- Legal limit/Time factor.
Diminishing balance method is method of depreciating non current asset which is also known as the, `reducing installment system’, or `written down value method’,. This method applies depreciation as a fixed percentage to the balance of the net cost of the asset not yet allocated at the end of the previous accounting period. The percentage of depreciation is so fixed … Read the rest