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What is Depreciation? Video Lecture | Macroeconomics- Learning and Analysis
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FAQs on What is Depreciation? Video Lecture - Macroeconomics- Learning and Analysis
| 1. What is depreciation in commerce? |  |
Ans. Depreciation in commerce refers to the systematic allocation of the cost of a tangible asset over its useful life. It represents the decrease in the value of an asset due to factors such as wear and tear, obsolescence, or decline in market value.
| 2. How is depreciation calculated? | |
Ans. Depreciation can be calculated using various methods such as straight-line method, declining balance method, and units of production method. The most common method is the straight-line method, which divides the cost of the asset by its useful life to determine the annual depreciation expense.
| 3. Why is depreciation important in commerce? | |
Ans. Depreciation is important in commerce as it helps in determining the true cost of using an asset over its useful life. It allows businesses to allocate the cost of the asset over its expected lifespan, which helps in accurate financial reporting and decision-making.
| 4. How does depreciation affect financial statements? | |
Ans. Depreciation affects financial statements by reducing the value of the asset on the balance sheet and increasing the depreciation expense on the income statement. This reduces the reported value of assets and net income, thereby impacting profitability ratios and overall financial performance.
| 5. Can depreciation be reversed or reversed? | |
Ans. Depreciation is generally considered a non-reversible process. Once an asset's value is depreciated, it is not typically reversed. However, if an asset's value increases significantly due to unforeseen factors such as market conditions, it may be revalued upwards to reflect its new value. However, this is not considered a reversal of depreciation but rather a revaluation.
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Dec 22, 2024 Last updated |
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