Features of Depreciation
The following are the features of depreciation:
- It is decline in the book value of fixed assets.
- It includes loss of value due to efflux ion of time, usage or obsolescence.
- It is a continuing process.
- It is an expired cost and therefore it must be deducted before calculating taxable profits.
For example, if profit before depreciation and tax is Rs. 50,000, and depreciation is Rs. 10,000; profit before tax will be:
- It is a non-cash expense. It does not involve any cash outflow. It is the process of writing-off the capital expenditure already incurred.