What are the methods for determining depreciation charges?

1 Answer

Answer :

The decrease in the value of the power plant equipment and building due to constant use is known as depreciation. The cost of depreciation will depend on the size and type  of equipment and on its estimated life.  The reduction in the value of the plant every year is known as annual depreciation. Due  to depreciation the plant has to be replaced by new one after its useful life. Therefore a  suitable amount must be set aside every year, so that by the time the plant retires the  collected amount by way of depreciation equals the cost of equipment.  The methods commonly used for determination of annual depreciation charges are

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