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Depreciation is a systematic process of distributing the cost of (tangible) assets over the life of assets.
Depreciation is a process of allocation.
Cost to be allocated = acquisition cot - salvage value
Allocated over the estimated useful life of assets.
Depreciation methods which are very popular are-
Straight line method- Depreciation = (Cost - Residual value) / Useful life
Diminishing balance method - Book value x Depreciation rate
Book value = Cost - Accumulated depreciation
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