18 Methods of Valuation · 18.1 Methods of valuation

18.1.8 Depreciation: straight line, sinking fund and constant percentage methods; obsolescence

Depreciation is the loss in a building's value with age and use; it is measured by the straight line (equal amounts), constant percentage (fixed % of the reducing value) or sinking fund (an interest-earning fund) method, and value is further reduced for obsolescence — functional or economic.

  • MPSC ATP
  • Standard level
  • 7 min read
  • Full course

Key terms

  • depreciation
  • straight line method
  • (C-S)/n
  • constant percentage method
  • declining balance
  • 1-(S/C)^(1/n)
  • sinking fund method
  • quantity survey method
  • scrap value
  • salvage value
  • junk value
  • physical depreciation
  • functional obsolescence
  • economic obsolescence
  • contingent depreciation
  • book value

What this note covers

  1. Core factsFoundation
  2. ExplainedStandard
  3. DeeperAdvanced
  4. Mains writingMains writing
  5. Common trapsFoundation
  6. Quick revisionFoundation

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