Question
Explain the different methods of calculating depreciation values.
Answer :
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Depreciation is the gradual reduction in the value of a fixed asset due to use, wear and tear, passage of time, technological changes, or obsolescence. In store operations, depreciation is important for determining the current value of equipment, furniture, fixtures, computers, shelves, vehicles, refrigeration units and other assets used in a retail store. Proper calculation of depreciation helps in maintaining accurate accounts, estimating replacement costs and assessing the actual value of store assets. One common method is the Straight-Line Method. Under this method, an equal amount of depreciation is charged every year throughout the useful life of the asset. The formula is: Annual Depreciation = (Cost of Asset – Estimated Scrap Value) ÷ Useful Life For example, if a store purchases equipment for ₹1,00,000, expects a scrap value of ₹10,000 and estimates its useful life at 5 years, annual depreciation will be ₹18,000. This method is simple and suitable for assets that provide approximately equal
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