Depreciation is a fixed cost and represents the loss of value of an asset which may be the result of physical wear and tear, chemical degradation or economic or technological obsolescence. Since depreciation is time dependent, it is normally expressed as a rate. The energy equipment will normally depreciate even if the plant is shut down. Main methods used to calculate the depreciation are:
The straight line
The declining balance
The sum-of-the-years-digits
The sinking fund
These methods assume that an asset has a certain predetermined service life at the end of which its value will have decreased to zero, or a residual junk or salvage value. The rate of ‘write-off’ affects the calculation of savings.
The straight line
The declining balance
The sum-of-the-years-digits
The sinking fund
These methods assume that an asset has a certain predetermined service life at the end of which its value will have decreased to zero, or a residual junk or salvage value. The rate of ‘write-off’ affects the calculation of savings.
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