1. The term depreciation is used only in respect of fixed assets. Of course, the current assets may also lose their value. Loss on account of fall in their value is taken caie of by valuing them for Balance Sheet purposes “at cost or market price whichever is less”.

2. Depreciation is a charge against profits. This means that true profit of the business cannot be ascertained withQut charging depreciation.

3. Depreciation is different from maintenance. Maintenance expenses are incurred for keeping the machine in a slate of efficiency. However, any degree of maintenance cannot assure that the asset will never reach a state of scrap. Of course, good maintenance delays this stage but it cannot absolutely prevent it.

4. All fixed assets, with certain possible exceptions e.g.,land, and antiques etc., suffer depreciation although the process i’nay be invisible or gradual.