"since the calculation of depreciation is based on
estimate,notfacts,why bother to make the calculation?
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Answer Posted / h.r. sreepada bhagi
Basis of depreciation is fact, i.e. cost of the assets, life
of the assets is estimate (i.e. No. of yrs.an asset can be
used). For financial accounting & tax accounting rates are
specified in the relevant statutory Acts of each country.
For Cost & Management accounting purpose, usually the cost
of the asset as reduced by the estimated reduced value is
divided by estimated output over the lifetime of the asset
or the estimated life of the asset, depending up on the
nature or class of the asset. While charging depreciation to
Profit & Loss A/c it's reasonableness and not accuracy which
is taken in to account.
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