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Tarun Suthar

 • 

The Institute of Chartered Accountants of India • 2m

Let me summarise this 😊 Depreciation refers to the wear and tear of tangible fixed assets, such as machinery and buildings (excluding land). Each year, you can deduct a fixed amount or a percentage of these assets until their value reaches zero at the end of their useful life. ( You can choose any of the SLM or WDV methods to record Depreciation) Similarly, amortisation applies to intangible assets, like software and servers. Depreciation is important for providing an accurate financial position of the company in any given financial year. If we were to deduct all depreciation in one year, it would lead to misleading profits or losses in the financial statements, so its divided into useful life age of an asset.

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