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Causes of Depreciation Video Lecture | Accountancy Class 11 - Commerce

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FAQs on Causes of Depreciation Video Lecture - Accountancy Class 11 - Commerce

1. What is depreciation?
Ans. Depreciation refers to the decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors. It is a common accounting concept used to allocate the cost of an asset over its useful life.
2. What are the causes of depreciation?
Ans. There are several causes of depreciation, including physical deterioration, functional obsolescence, economic obsolescence, market demand, and technological advancements. These factors can contribute to the decline in the value of an asset.
3. How does physical deterioration cause depreciation?
Ans. Physical deterioration refers to the wear and tear an asset undergoes over time, leading to a decrease in its value. Factors such as age, usage, and exposure to environmental conditions can contribute to physical deterioration and ultimately result in depreciation.
4. What is functional obsolescence and how does it cause depreciation?
Ans. Functional obsolescence occurs when an asset becomes less efficient or outdated due to changes in technology, design, or market demand. This can lead to a decrease in the asset's value as it becomes less desirable or less useful compared to newer alternatives.
5. How does economic obsolescence impact depreciation?
Ans. Economic obsolescence refers to the decrease in an asset's value due to external factors such as changes in the market, competition, or economic conditions. For example, if a property's value declines due to the construction of a new highway that diverts traffic away from the area, it would experience economic obsolescence and subsequent depreciation.
82 videos|105 docs|42 tests

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