Depreciation, Gross investment and Net investment
Depreciation , gross investment, and net i nvestment Depreciation : Depreciation refers to the reduction in the value of fixed assets due to normal wear and tear, the passage of time, or expected obsolescence . According to L .C. Cropper “Depreciation is the diminution in the value of assets owing to wear and tear, the ef f u s ion of time, obsolescence or similar causes.” According to Northcott & Forsyth, "Depreciation is the reduction in the value of a fixed asset occasioned by physical wear and tear, obsolescence or the passage of time.” For example, a firm invests in a new machine whose expected life of service is 10 years . If each year one-tenth of its original value is getting depreciated. So, instead of considering a bulk investment for replacement after ten years, the firm takes into...