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assets aims to align asset usage with sales though its physical condition is still good.
revenue. Therefore, its purpose is not to The two main economic factors are usually
record the decrease in the value of an asset obsolescence and inadequacy. Obsolescence
resulting from revaluations. Furthermore, occurs when an asset is put out of use
depreciation is not intended to set aside because it is out of date (outdated). For
funds for asset replacement at a later stage. instance, the development in science and
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Instead, it indirectly reduces profits by the technology caused significant evolution
depreciation amount.
in the electronic devices used in the
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Causes of depreciation commercial music industry. The usefulness
Depreciation is caused by various factors life of such equipment becomes so short
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which give rise to a reduction in the value of not because of physical deterioration.
a tangible non-current asset. These include For instance, the moment a new version
physical deterioration, economic factors, of music instrument is released the old
time and depletion. equipment becomes obsolete, hence taken

Physical deterioration out of use by musicians. The other economic
The physical deterioration of a PPE may factor causing depreciation is inadequacy,
be due to wear and tear, erosion, rust or which arises due to the asset’s low capacity
decay. Wear and tear are very common in compared to prevailing economic demands.
PPE. When PPE such as motor vehicle, This happens when an asset is no longer
machinery, fixtures and fittings are used, used because its capacity cannot cope with
their physical conditions deteriorate, hence the growth and changes in the size of the
they wear out. Metals in motor vehicles or business. The replacement of the old Wami
machinery will rust away while wood will bridge with a larger and stronger bridge to
eventually rot. Decaying of PPE can be due cope with increasing vehicle traffic is an
to elements of nature or the lack of proper example of depreciation of the old bridge
attention. Therefore, some of the PPE last
many years, while others last for only a due to inadequacy. The same example
few years. The same applies to buildings, applies with the replacement of the old
of which some are lasting for a longer time. ferry/boat at Kigamboni due to increasing
For the case of land, it may be eroded or passengers in the area.
wasted away by the action of wind, rain,
sun and other elements of nature. Time passage
Time is a factor that causes depreciation of
Deterioration due to economic asset, particularly when its usage access is
factors time bound. Even in the case of wear and
Depreciation may also be caused by tear, erosion, etc., and for obsolescence and
economic factors when an asset owned inadequacy to take place, time is needed.
by a business being put out of use even

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