a)    Depreciation is a measure of the wear and tear or loss in value of an asset over its life. It is the difference between the cost of a fixed assets and the amount received when it is sold. Assets such as plant, equipment, motor vehicles and furniture are all assets that lose value over time due to either wear and tear or, economic factors such as inadequacy and obsolescence or, the simple passing of time.  

b)    The purpose of depreciation charge in the accounts is to ensure that the value of fixed assets in the balance sheet is reflective of the current value of the assets.  Fixed assets must be depreciated in accordance with the accruals and prudence concepts, except non depreciable land which under normal economic conditions appreciates in value.  Each year the asset will appear in the balance sheet at its reduced book value (net book value), while the reduction, called depreciation, is treated as an expense in the profit and loss account. 

c)     Capital costs relating to fixed assets