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Causes of deprecation

Physical wear and tear

When the fixed assets are put to use, the value of such assets may decrease. Such decrease in the value of assets is said to be due to physical wear & tear.


With passage of time

When assets are exposed to the force of nature like weather, wind rain etc. The value of such assets may decrease even if they are not put to any use.

Change in economic environment

The value of an assets may decrease due to decrease in demand of the asset. The demand of the assets may decrease due to technological changes, charges in the habits of consumers.

Expiration of legal rights

When the use of an assets is governed by the time bound arrangement the value of such assets may decrease with the passage of time.





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