Essay On Depreciation

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Depreciation is a noncash expense that reduces the value of fixed asset as a result of wear and tear, age, or obsolescence. The example of fixed asset that can be depreciated is office equipment, furniture, building, machinery, leasehold improvement, fixtures, trucks, and cars that all are not last indefinitely but it will last for more than one year. But expect land, because land is natural resources not depleted over time. Depreciation also is an allocation process. The cost to be allocated equal to acquisition minus the salvage value. It is allocated based on the estimated of useful life of asset. All the allocation method must be rational and systematic. The depreciation is amount of the cost to be allocated within an accounting period. The depreciation can be calculated in many method, the common method is straight-line depreciation and other is accelerated depreciation method and the Units of production depreciation. There also have some causes of depreciation for example like the physical deterioration, economic factors, time, and depletion. Like the physical deterioration, the wear and tear when a machinery or motor vehicle or fixtures and fitting are used they finally wear out. Some of the…show more content…
The formula of this method is depreciation equal total acquisition cost minus the salvage value then divided the estimated total units. For example, purchase a machine to produces shoes on the cost of RM4000000 that can produces 500000 pair of shoes over its useful life. Then the estimated that the machine has a salvage value of RM400000. Then use the unit of production method to calculate it, take the RM4000000 minus the RM400000 then divided by 500000 then the cost of per units of shoes is

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