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Business is established for indefinite period. This is why, it acquires fixed assets for its use. These assets increase the profit earning capacity. Fixed assets are constantly used in the business. The assets Jose their value gradually due to their constant use. Loss in the value and utility of assets due to their constant use and expiry of time is termed as depreciation. It has been our own experience that the furniture purchased for our own use in 2004 will lose a part of its value and lustre in 2005. Its value will further decrease in 2006 and so its effectiveness and value will go on decreasing with the passage of time. This ‘wear and tear’ is known as ‘Depreciation’ in accounting:


According to R.N. Carter, “Depreciation is gradual and permanent decrease in the value of an asset from any cause”.


W. Pickles views. “Depreciation may be defined as permanent and continuing diminution in the quality, quantity or the value of an asset”.


In the opinion of Spicer and Peglar, “Depreciation is the measure of exhaustion of the effective life of an asset from any cause during a given period”.


According to Accounting Standard, “Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, efflux ion of time or obsolescence through technology and market changes”.


According to Institute of Cost and Management Accounting London (ICMA) terminology. “The depreciation is the diminution in intrinsic value of the asset due to use and/or lapse of time”.


According to Accounting Standard-6 issued by the Institute of Chartered Accountants of India (in November 1987) every company is liable to make provision for depreciation on its fixed assets.