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The word 'Depreciation' has been derived from the Latin word 'Depretium' which means 'decline in price' or 'value'. Depreciation relates to fixed assets which loose value on account of usage. Therefore 'Depreciation' means decline in value of fixed assets on account of usage. Definitions: Depreciation may be defined as the permanent and continuing diminution in the quality, quantity or the value of an asset.William Pickles Depreciation in the shrinkage in the value of an …

…Assessment and allocation of periodic depreciation usually rest on the depreciable asset's a) Original cost, b) estimated residual value, c) expected useful life. a.Original cost It represents the historical cost as well as additions and improvements if any. b.Estimated residual value It is the amount likely to be realized on the disposition of asset as a scrap. c.Useful life It refers to depreciable asset's effective service, expressed in periods to the organization.