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Basic Features of Depreciation

  • The term depreciation is related to depreciable fixed assets only
  • It is a charge against profits i.e. an expense to the Profit and Loss A/c
  • It is a permanent and continuous decrease in the book value of an asset
  • It is caused due to wear and tear, effluxion of time, obsolescence etc.
  • It is a non-cash expenditure

Note: Appropriation of profit is the distribution of net profit to various heads. Charge against profit is the deduction from revenue to ascertain net profit or net loss.

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