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DEPRECIATION POLICIES






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Postini Alternative

 
The Production Unit Method and the Mileage Method

These two method are similar to machine hour rate method.

Click to read - The Production Unit Method and the Mileage Method

Machine-Hour Rate Method

This method is applied for depreciating machines. The life of the machines is fixed in terms of hour.

Click to read - Machine-Hour Rate Method

Depletion Method

This method is used in case of wasting assets such as mines, oil and gas resources, timber etc.

Click to read - Depletion Method

Revaluation Method

Under this method assets are revalued at the end of each year. The difference of the revaluation price of the two years is the depreciation be charged to profit and loss account.

Click to read - Revaluation Method

Insurance Policy Method

Under this method, an endowment insurance policy is taken on the life of the assert from an insurance company.

Click to read - Insurance Policy Method

Annuity Method

This method recognizes the fact that the business besides losing the original cost of the asset also loss interest on the amount of investment in assert which the business would have earned if the same amount is invested in some other form of investment.

Click to read - Annuity Method

Sinking Fund Method

This method is also known as Redemption Fund Method, Amortization Fund Method, and Depreciation Fund Method.

Click to read - Sinking Fund Method

Sum of Years' Digit Method

This method is like Written Down value method where the amount of depreciation goes on decreasing under this method, the amount of depreciation to be charged is calculated by adding the numbers representing the periods of life charged.

Click to read - Sum of Years' Digit Method

Diminishing Balance Method or Written Down Value Method

Under this method, depreciation is charged at a fixed rate every year but on reducing balance i.e., on balance reduced each year during the economic life of the asset by the amount of depreciation till the asset is reduced to its scrap value.

Click to read - Diminishing Balance Method or Written Down Value Method

Straight Line Method or Fixed Installment Method

Under this method, the depreciation is charged evenly every year throughout the economic life of the asset.

Click to read - Straight Line Method or Fixed Installment Method

Methods of providing depreciation

There are number of different methods in use for allocating the cost of an asset for a year's depreciation during the economic life of the asset.

Click to read - Methods of providing depreciation

Determining sound depreciation policy

The provision of an appropriate an reasonable amount of depreciation on fixed assets is one of the important responsibilities of the financial executives.

Click to read - Determining sound depreciation policy

Depreciation policy

The depreciation on assets is provided in order to active the following main objective

Click to read - Depreciation policy

Basic Considerable Factors

In order to determine the amount of depreciation chargeable as an expense for on the accounting period. The following three basic factors should be considered

Click to read - Basic Considerable Factors

Causes of Depreciation

The causes of depreciation can be classified broadly into two categories:- (1) Physical causes and (2) Functional causes.

Click to read - Causes of Depreciation

Meaning, Causes and Basic Factors of Depreciation

In day to day usage, the term depreciation denotes the decrease in the value of fixed assets except land. With the exception of land most fixed assets have a limited useful life; that is they will be of no use to the company over a limited number of accounting year.

Click to read - Meaning, Causes and Basic Factors of Depreciation



 
 
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