Depreciation accounting
Querist : Anonymous
Depreciation is measurement of loss of reduction in value of depreciable asset aris due to passage of time ,use and technologies change in market.
We depreciate the asset due to reduce its value by time to time .But how can we say that building is depreciable asset ? As it has always appreciation in value by time to time .Its value will increase in future at market.So why we charge depreciation on building ?
Moreover, building is depreciable assets as it has limited life, and the land is non-depreciable assets any way....
I hope you get the answer...
However, I am surprised that in practical most of the professional do not follow this practice....
Querist : Anonymous
1. building never has an unlimited life. So if you keep holding the building, it shall require rebuilding or repairs after some time. Therefore depreciation is charged.
2. the appreciation in value, even if we assume is only for the building and not for the land, has no relation to the depreciation. appreciation only reflects the replacement value. the land is not depreciated because it doesn't require any cost for re-building. But a building would require money for re-construction or repair. thats why depreciation is charged.
3. if you construct a building in Thar Desert, it may not appreciate. The appreciation is a reflection of demand and supply for the land.
I firmly agree with Sanjeev Sahab and Tushar Bhai's comments.
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