What are the causes of depreciation?

ANS: i) Physical Causes. Under this classification, we may include-

(a) wear and tear due to use

(b) deterioration and decay with the passage of time, whether used or not

(c) damage and destruction due to an accident like fire, flood, earthquake, mishandling etc

(d) depletion of asset.

(2) Functional Causes. The following causes may be included under functional causes-

(a) uselessness for the present purpose.

(b)Obsolescence i.e., due to innovation, invention, change in technique etc.

Causes of depreciation may also be classified as internal and external. Internal causes are that arising from the operation of any cause natural to or inherent in the asst itself such as wear an there due to use an depletion. External causes are that arising from the operation of forces outside the asset itself, such as obsolescence and efflux of time.

BY ADITYA 2nd SEM