Thursday 7 February 2013

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What is the meaning of useful life of a non-current (fixed) asset?


In the calculation of depreciation of a non current asset, we need to know about the useful life of the asset.

Depreciation is the diminution in the value of an asset over period of time by internal factors (like wear and tear) or/and by external factors (like technology advancement).

The useful life of an asset means the period of time during which the asset can be used in a profitable way. That mean after this period, the cost of maintaining an asset will exceed the benefits expected to be achieved by the use of that asset.

Estimated or actual useful life can be used in the calculation of depreciation.

So, after the useful life of an asset it is better to consider replacement of the asset

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