What is Depreciation In Accounting | Types | Calculator 2021

 What is Depreciation In Accounting | Types | Calculator 2021:- Depreciation is defined as a systematic decrease in the known value of a certain asset until its value is reconstituted or forgotten.

What is Depreciation In Accounting 2021

Depreciation is a mathematical method for determining the probability of a useful or intangible asset for its main life or for all the days of its life. Core Assets will spend a year on assets used a portion of their cost to help the company generate revenue from the assets.
Examples of fixed assets include buildings, furniture, office equipment, machinery, etc. This is a very valuable exception as the price of land changes over time.
Depreciation allows a portion of the value of the fixed asset to be income from the fixed asset. It is applied in case of litigation because the revenue, as well as the associated cost, is recorded at the time of the statement in which the asset is being used. It helps in getting a complete picture of the revenue streams.
Example of discount: If a truck costs a company Rs. Bought at a price of Rs. 100,000 and the expected use during the five years of the truck that the company will reduce its assets to at least Rs. 20,000 per annum for five years.

Types of Depreciation In Accounting

There are three types of Depreciation in Accounting:-

  1. Straight-line Depreciation Method
  2. Unit of Production Method
  3. Double Declining Method
  • Straight-line Depreciation Method:-  This is the simplest method in depreciation. It includes a basic allotment of an even pace of deterioration consistently over the valuable existence of the resource. The equation for straight-line depreciation is:

Annual Depreciation expense= (Asset cost - Residual Value)/ Useful life of the assest

Example- Suppose a manufacturing company purchases machinery for Rs 200,000 and the useful life of the machinery are 10 years and the residual value of the machinery is Rs 40,000

Annual Depreciation expense= (200000-40000)/10= Rs 16000
  • Unit of Production Method:- This is a two-venture measure, in contrast to the straight-line technique. Here, equivalent cost rates are allocated to every unit created. This task makes the technique extremely helpful in getting together for creation lines. Thus, the computation depends on the yield ability of the resource instead of the number of years.

For Info About Depreciation

The Steps are:-

Step 1: Calculate per unit depreciation

Per unit Depreciation= (Asset cost - Residual value)/ Useful life in units of production

Step 2: Calculator the total depreciation of actual units produced:

Total Depreciation Expense= Per Unit Depreciation * Units Produced

  • Double Declining Method:- This is one of the two normal techniques an organization uses to represent the costs of a proper resource. This is a sped-up devaluation technique. As the name recommends, it considers cost twice much as the book's worth of the resource consistently.

The Formula is:

Depreciation = 2 * Straight-line depreciation percent * book value at the beginning of the accounting period

Book value = Cost of the asset - accumulated depreciation

Accumulated depreciation is the total depreciation of the fixed asset accumulated up to a specified time.

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