Depreciation
is a decrease in farm machines or other equipment worth. Newly purchased
machines have the advantages of the latest technical improvements and operate
with less chance of breakdowns or less need of repairs. The usual causes of
declining value of farm machine include, inter alia;
Technological depreciation: New developmental means of
accomplishing a function such as changes in farm practices, and so on, may take
the present machine uneconomical or obsolete.
Functional depreciation: Functional depreciation results from
making demand on a machine which may increase beyond its capacity to produce. For
example, increase in farm size can render the machine unfit to meet the demand.
Physical depreciation: physical depreciation are the daily
tear and wear of the equipment due to its operations which gradually lessens
the physical ability of a machine to perform its intended function.
Monetary depreciation: This usually results from a change
in price level of machine with the attendant troublesome decreases in value of
depreciation reserves.
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