CHAPTER ONE
INTRODUCTION
Depreciation is one of the most controversial and troublesome areas in accounting. Depreciation was actually a cost of doing business. Business executive tended to view depreciation as a matter of setting aside something during prosperous periods for the replacement of depreciable assets. When earnings are high, large amounts of depreciation might be recorded and when earnings were low or less provision for depreciation was recorded. Today, it is universally agreed that depreciation is an expenses that must be recorded whether or not revenue is sufficient to absorb it. Depreciation has been given different interpretations and meanings by various authors and experts in the accounting field as a result many definitions of depreciation exist as many as the authors and experts themselves. Some of the numerous definitions of the term depreciation as defined by many authors will be examined. The institute of chartered accountant of Canada defined depreciation as a proportionate charge of an expanse to an accounting period based the cost as other recorded value of fixed assets. Himmed Clan (third international congress on accounting defined depreciation as the price spreading the value of a fixed asset.
Montgomery (auditing theory and practice) defined depreciation as an allocation of the entire cost of depreciable assets to the operating express of a series of fiscal period. The American Institute of Certified public Accountants defined depreciation accounting as a system of accounting which aims to distribute the cost or other basic value (if any) over the estimated useful life of the unit which may be a group of assets in a systematic and rational manner. Depreciation is a part of the cost of a fixed asset is not recoverable on disposal and is this part of the cost of fixed assets consumed during its period of use by the firm. It is an expense, which is charged to the profit and loss account of a period before ascertaining the real net profit or loss of an enterprise. Depreciation is sometimes divided into two classes: INTERNAL DEPRECIATION: Internal depreciation which arises from the operation of any cause natural to or inherent in the asset itself for instance, wear and tear of plant and machinery.