Depreciation

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Almost all business owns some non-trading fixed assets like land,building,machinery,furniture,vechiles etc. These assets are not of infinite durability . All fixed assets except land decline in value with passage of time and are reduced to scrap. That is , each year the intrinsic value of the asset declines. Such reduction in the value of asset each year is a loss and/or expense which is technically termed as depreciation. The common causes of depreciation are physical wear and tear and obsolescence.