The initial cost of a paint sand mill, including its installation is P 700,000.00 . The BIR approved life of this machine is 19 years of depreciation. The estimated salvage value if the mill os P 8,000.00 and the cost of dismantling is estimated to be P 5,000.00 . Using straight line depreciation, what is the book value of the machine at the end of 6 years?

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.