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Difference among depreciation, fluctuation and obsolescence

If, this question is asked from a person who is not related with accounting field , will not able to differ among them. But as an accountant, you should know what is meaning of above term and where can use in accounting.

Depreciation

It is a gradual deterioration or decrease in the value of asset after using that asset in our day to day work or after spending of time. In this world, everything is perishable, so making true profit and calculates true value of any asset at present time, it is very necessary to depreciate on fixed asset and deduct from it.

Fluctuation

If you are doing business or linked with any business, you know that prices are always up and down due to changing in the condition of business environment. Fast changing in market prices is called fluctuation. It is not called depreciation because, it is not related to use of fixed asset. Fluctuation can also increase the price of fixed asset but after deducting depreciation, value of fixed assets will be decreased. Fluctuation is fully ignored and there is no accounting treatment. But we show depreciation as a loss of business.

Obsolescence

When new fixed assets’ quality, efficiency and capacity decrease the value and usability of old fixed assets, then it is called obsolescence of old fixed assets.
The main example, we can look in different machines or technical equipment especially in medical field. Every new equipment decreases the value of previous equipment. Because of it is not related to the nature and use of fixed asset, so it is also not depreciation. Obsolescence is not important in field of accounting but it is important in technology research and marketing of product.

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Accounting Education: Difference among depreciation, fluctuation and obsolescence
Difference among depreciation, fluctuation and obsolescence
Accounting Education
http://www.svtuition.org/2009/02/difference-among-depreciation.html
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