DEPRECIATION AND OBSOLESCENCE

DEPRECIATION

Depreciation is the gradually loss in the value of the property due to its use, life, wear, tear and decay. This is an assessment of the physical wear and tear of the building or property and is naturally dependent on its original condition, quality of maintenance and mode of use.

TYPE OF DEPRECIATION

The type of depreciation are :

(a) Physical depreciation
     1. Wear and tear from operation
     2. Decrepitude i.e. action of time and other elements

(b) Functional depreciation
     1. Inadequacy or suppression
     2. Obsolescence

OBSOLESCENCE

Obsolescence may be defined as the loss in the value of the property due to change in fashions, in design, in structures, etc.

TYPE OF OBSOLESCENCE

(a) Internal Obsolescence
     1. Poor or old design
     2. Change in type of construction
     3. Change in kind of construction
     4. Change in utility demand

(b) External Obsolescence
     1. Poor original location
     2. Change in the character of the district
     3. Zoning laws

METHOD OF CALCULATING DEPRECIATION

1. Straight line method
2. Constant percentage method
3. Sinking fund method
4. Quantity survey method

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