Depreciation is explained in both accounting and economic terms.
There are two types of depreciation in terms of real capital assets namely; physical depreciation and functional depreciation. The physical depreciation is the total loss in market value which is caused due to some of the physical activities. This depreciation involves any kind of repairs that involve cost. In this depreciation there are two kinds, one that is curable and the other that is incurable. The curable one is the one, which can be corrected economically. The other, which is the incurable, involves huge amounts of cost. Subsequent the Functional Depreciation is the total loss caused by inadequate design.
In the subject of accounting there are two types of depreciation; Book Depreciation and Tax Depreciation.
Book Depreciation is done for the reference of the company in order to report its financial records to its share holders, stockholders, etc.
Tax Depreciation is simply done for the reason of collecting taxes.
DEPRECIATION ARE BROADLY CLASSIFIED IN TO 9 TYPES
1.STRAIGHT LINE METHOD
4.INSURANCE POLICY METHOD
5.SINKING FUND METHOD
7.DEPRECIATION FUND METHOD
8.SUM OF DIGIT YEAR METHOD