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Depreciation refers to the gradual reduction in the value of a fixed asset due to factors such as wear and tear, passage of time, technological changes, obsolescence, or continuous use. In store operations, depreciation is important because retail stores use various fixed assets such as furniture, display racks, shelves, computers, billing machines, air-conditioners, refrigerators, vehicles, lighting equipment, and other store fixtures. Since these assets provide benefits over several years, their cost should be allocated systematically over their useful life. The amount charged as depreciation each year is treated as an expense and helps in determining the true operating cost and profit of a retail store. There are several methods of calculating depreciation. The selection of a method depends on the nature of the asset, its expected pattern of use, useful life, and accounting policy of the organisation. The Straight-Line Method is one of the simplest and most widely used methods of calculating depreciation. Under this method, an equal amount of depreciation is charged every year throughout the useful life of the asset. The depreciable amount is calculated by subtracting the estimated residual or scrap value from the original cost of the asset. The formula is: Annual Depreciation = (Cost of Asset − Residual Value) ÷ Useful Life For example, suppose a retail store purchases display equipment for ₹1,00,000, expects a residual value of ₹10,000, and estimates its useful life at five years. Annual depreciation will be ₹18,000. The same amount will be charged in each of the five years. This method is suitable for ____ ______ _____ ____ _________ _______ _________ ___ ____ _____ _________.
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