Need for Charging DepreciationFactors Affecting the Amount of Deprecia

1.	Need for Charging DepreciationFactors Affecting the Amount of Depreciation
Answer» <p>Following are the important factors which should be considered for determining the amount of depreciation.</p><p>1. Cost Of AssetsThe cost ofassetinclude the purchase price, less any tradediscountplus all the costs essential to bring theassetto a usable condition.In other word, the total cost ofassetincludes from purchase price to theinstallation.</p><p>2. Estimated Scrap ValueScrap value refers to the value estimated to be realized after the expiry of the useful working life of theasset. This is also known as residual value or salvage value. Depreciation should be determined after deducting the estimated scrap value from the cost ofasset.</p><p>3. Estimated Useful LifeAnassetcan not work forever. Everyassethas a certain working and useful life. The longer the working life, the amount of depreciation will be lower and vice verse. Therefore, the useful life of anassetis generally to be taken in terms ofasset's expected use. This estimated useful life ofassetdetermines the rate or the amount of depreciation.</p><p>4. Legal ProvisionsThe amount of depreciation also depends upon the statutory and legal provisions prescribing theadmissiblerate of depreciation on fixed assets.</p> <p>thank you so much.</p>

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