Depreciation

With the passenger of time, all fixed assets, with the exception of land, lose their capacity to provide services. According the cost of such fixed assets such as furniture, building, machinery, equipment, etc. must be transferred to the related expense accounts in a systematic manner during their expected economic life time. This periodic cost expiration is called as depreciation is reduction in the value of the fixed asset (expect land) due to wear and tear, usage, lapse of time. Obsolescence and various such other reasons. The process of spreading the cost of the asset over its economic life time is termed as depreciation. Depreciation is deducted from the value of the fixed assets from the Balance Sheet- Assets side and debited to the profit and loss account.