Question: True or False: In accountancy class 12th, the concept of depreciation is only applicable to tangible assets.

Answer:
Introduction:
In the field of accountancy, the concept of depreciation is crucial for determining the accurate financial position of a business. It involves the systematic allocation of the cost of an asset over its useful life. However, the statement that depreciation is only applicable to tangible assets is false. Let's delve into the details to understand why.

Explanation:
1. Definition of Depreciation:
Depreciation refers to the gradual decrease in the value of an asset due to wear and tear, obsolescence, or any other factors. It is recorded as an expense in the income statement and helps in matching the cost of the asset with the revenue it generates.

2. Types of Assets:
Assets can be broadly classified into two categories: tangible and intangible.

2.1 Tangible Assets:
Tangible assets are physical assets that have a physical substance and can be seen or touched. Examples include buildings, machinery, furniture, and vehicles.

2.2 Intangible Assets:
Intangible assets, on the other hand, lack physical substance and cannot be seen or touched. These assets derive their value from intellectual or legal rights. Examples include patents, copyrights, trademarks, and goodwill.

3. Depreciation of Tangible Assets:
Tangible assets are subject to depreciation as they have a limited useful life. The process of allocating the cost of tangible assets over their useful life is known as depreciation. Various methods, such as straight-line, reducing balance, and sum-of-years' digits, can be used to calculate depreciation for different tangible assets.

4. Depreciation of Intangible Assets:
Contrary to the statement, depreciation is also applicable to certain types of intangible assets. However, instead of using the term "depreciation," the process of allocating the cost of intangible assets over their useful life is called "amortization." Intangible assets like patents, copyrights, and trademarks have a limited useful life and their value diminishes over time. Hence, they are subject to amortization.

Conclusion:
In conclusion, the statement that depreciation is only applicable to tangible assets is false. Depreciation is a concept that applies to both tangible and intangible assets. Tangible assets are subject to depreciation, whereas intangible assets are subject to amortization. By applying appropriate methods, businesses can accurately allocate the cost of assets over their useful life, reflecting the true financial position of the organization.