DEPRECIATION OF FIXED ASSETS

FINANCIAL ACCOUNTING SSS2 FIRST TERM        

WEEK 6

DEPRECIATION OF FIXED ASSETS

Performance Objectives

Students should be able to:

1. Define the term depreciation
2. State four causes of the depreciation of assets.

Contents

Depreciation may be defined as the permanent and continuing diminution (or lessening) in the quality, quantity or value of an asset.          

CAUSES OF DEPRECIATION

1. Physical factors – Assets may depreciate in value as a result of physical factors like humidity (or dampness), heat, erosion, evaporation of liquids, rust, rot and decay etc
2. Wear and Tear – An asset may depreciate as a result of constant usage.
3. Passage of Time – or Effluxion of Time; Assets like patents, copyrights, leaseholds etc have a fixed period of legal life. They, therefore,…