Depreciation is a way of charging for the use of an asset in earning the current period’s profits. It spreads the cost of a non-current assets over its useful life. This is an example of accrual or matching concept.

Depreciation is the allocation of the Depreciable amount of an asset over its estimated useful life. This allocated amount is charged against the income statement/Profit and Loss Account.                                                                                       (2 marks)

The useful Life of an Asset is either the period over which a depreciable asset is expected to be used. OR the number of production/similar unit expected to be obtained from the Asset by the enterprise/company.                                             (2 marks)

• Physical deterioration/Expected physical wear and tear.
• Obsolescence/Economic factors.
• Depletion (Natural resources such as mines)
• Legal limit/Time factor.