Explain the term depreciation.

Explain the term depreciation.
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Answer :

The decrease in the value of the power plant equipment and building due to constant use is known as depreciation. In practice, every power station has a useful life ranging from fifteen to thirty years. From the time the power station is installed, its equipment steadily deteriorates due to wear and tear so that there is a gradual reduction in the value of the plant. This reduction in the value of plant every year is known as annual depreciation.
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