11th NCERT Accountancy Chapter 7
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– Depreciation: Understanding the concept of depreciation, its need, and causes【4:0†source】.
– Factors Affecting Depreciation: Explaining the basic factors influencing the amount of depreciation【4:0†source】.
– Methods of Calculating Depreciation: Exploring the straight line method and written down value method, including their application and suitability【4:0†source】.
– Recording Depreciation: Detailing two methods of recording depreciation – charging to asset account and creating provision for depreciation account【4:0†source】.
– Effects of Depreciation on Profit and Loss: Understanding the impact of depreciation on the profit and loss account and balance sheet【4:0†source】.
– Reserves: Differentiating between provisions and reserves, and providing examples of revenue and capital reserves【4:0†source】.
What is 'Depreciation'?
Depreciation refers to the systematic allocation of the cost of a tangible asset over its useful life to match its cost with revenue it helps to generate.
State briefly the need for providing depreciation.
The need for providing depreciation arises from the fact that assets lose value over time due to wear and tear, obsolescence, etc. Depreciation helps in spreading the cost of the asset over its useful life and matching it with the revenue it helps to generate.
What are the causes of depreciation?
Depreciation can be caused by physical wear and tear, technological obsolescence, passage of time, decay, or inadequacy of the asset to meet new requirements.
Explain basic factors affecting the amount of depreciation.
The amount of depreciation is affected by factors such as the cost of the asset, its expected useful life, the estimated residual value, and the chosen method of depreciation.
Distinguish between straight line method and written down value method of calculating depreciation.
The straight-line method allocates an equal amount of depreciation each year, while the written down value method applies depreciation based on the reducing balance of the asset's book value. The straight-line method results in a constant depreciation expense per year, whereas the written down value method usually leads to higher depreciation charges in the earlier years of an asset's life.
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