Causes Of Depreciation

The main causes of depreciation of assets can be expressed as follows:

1. Regular Use

Regular and constant use may reduce the efficiency of the asset. So, depreciation arises due to wear and tear of an asset.

2. Passage Of Time

Usefulness of the asset will decline with the passage of time. So, effusion of time is another major factor of depreciation.

3. Obsolescence

Utility of the asset may reduce because of change in fashion, new technology and new invention. So, asset will become out of date and depreciation arises.

              Also Read: Factors Affecting Depreciation Amount

4. Perishability

Perishability is another factor that causes depreciation. Assets like inventory and raw materials have short life span than fixed assets.

5. Accidents

Value of assets may be depreciated due to unexpected accidents like fire, earthquake, mishandling etc.


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