Depreciation Accounting — Chapter Summary
Telangana Open School (TOSS) · Class 12 · Accountancy
Summary of Depreciation Accounting for Telangana Open School (TOSS) Class 12 Accountancy. Fixed assets like machinery, vehicles, and furniture are.
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Overview
Fixed assets like machinery, vehicles, and furniture are long-term investments that help a business operate over many years. However, these assets lose value over time due to usage, age, and technological changes. This gradual loss in value is called depreciation. In accountancy, it's important to s
Key Concepts
Depreciation is the gradual reduction
Depreciation is the gradual reduction in the value of a fixed asset due to wear and tear, passage of time, or obsolescence. It is treated as an expens
Depreciation occurs due to (i) normal
Depreciation occurs due to (i) normal wear and tear from use or time, and (ii) obsolescence caused by new technology or changes in market demand. For
The main objectives
The main objectives are: (1) to show the true financial position by correctly valuing assets in the balance sheet, and (2) to keep funds in the busine
Four key factors
Four key factors are: (1) Cost of the asset (purchase + installation), (2) Useful life (how many years it will last), (3) Scrap value (value at end of
In this method
In this method, the same amount of depreciation is charged every year. It is calculated as: (Cost - Scrap Value) ÷ Useful Life. For example, a machine
Learning Objectives
- Understand the meaning and concept of depreciation
- Explain the causes of depreciation
- State the objectives of charging depreciation
- Identify the factors affecting depreciation
- Learn the methods of charging depreciation
Frequently Asked Questions
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Sources & Official References
Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.
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