what do you understand by appreciation and depreciation of
fixed assets?
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Answer / danny deb
Appreciation of an asset means that the market value has
gone higher than the value at which it has been brought.
eg. Land..u buy a land today for say 5 lakhs and after 2-5
years u sell the same land in 10 lakhs. This means that the
value of land(fixed asset) has appreciated by 5 lakhs.
Depreciation of an asset means that the value of the asset
has gone down from its buying or purchase value due to use,
wear and tear.
Eg.. Machinery...u buy a machine at the market value of 1
Lakh. U use it for 2 years. the value of the same machine
will reduce if u resell it as u have used it and also to the
constant wear and tear, repairs etc. A company or firm
always keeps a provision for this and deducts depreciation
at a suitable percentage(lets say 10% or 15%) depending on
the type of asset and its use.
Hopefully i have answered correct!!! ha..ha..ha
all the best!!!
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