Answer :
Depreciation is :
- added to the gross domestic product (GDP) to reach the net domestic product (NDP).
- the reduction in the value of capital goods due to physical wear and tear.
What is Depreciation?
- It is the actual reduction in the fair value of assets, such as the annual depreciation of plant equipment.
- Currency depreciation against other currencies.
- Depreciation refers to an accounting technique used to allocate the cost of a tangible or physical asset over its useful life.
- Depreciation indicates how much of an asset's value has been used.
- It allows companies to generate income from the assets they own by making payments over a period of time.
- Depreciation Example – If the company van has a price of Rs. 200,000 and the truck has an expected life of 5 years, the company can depreciate the asset as Rs. 10,000 yen each year for 5 years.
Thus, depreciation is a concept that has two meanings in two different contexts which involve first accounting concepts & in economic concepts. In accounting terms it means wear & tear in the life of assets, also it measures the life of assets. And on the other hand in economic concepts, it means a reduction in the value of a currency with respect to other currencies.
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