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 So, asset will become out of date and depreciation arises.
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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.
