Basis of Use System of Depreciation
Basis of Use System of Depreciation:
Learning Objectives:

Define and explain the basis of use system of depreciation.
One of the chief factors causing depreciation is use. For example in the case of plant and machinery, it is the total number of hours for which the machines work is the main factor and not their life. Therefore, depreciation should be charged on the basis of use. In order to calculate, the total number of hours for which the machine is estimated to work is ascertained. The net cost of the asset is divided by the number of hours estimated and the result would give the amount of depreciation per hour. Each year depreciation would be written off at this rate on the number of hours worked during the year.
Example:
A machine is bought for $40,000 and its life is estimated at 20,000 hours. The hourly rate of depreciation will be $2. If in a year machine is used for 1,000 hours, depreciation will be $2,000 (1,000 × 2).
You may also be interested in other articles from “accounting for depreciation” chapter:
 Definition and Explanation of Depreciation
 Causes of Depreciation
 Need for Depreciation
 Depreciation, Depletion and Amortization
 Difference Between Depreciation and Fluctuation
 Basic Factors of Determination of Depreciation
 Depreciation Methods / Methods for Providing Depreciation
 Fixed Installment Method / Straight Line Method / Original Cost Method
 Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
 Annuity Method of Depreciation
 Depreciation Fund Method or Sinking Fund Method
 Insurance Policy Method of Depreciation
 Revaluation Method of Depreciation
 Sum of the Years’ Digits Method of Depreciation
 Double Declining Balance Method of Depreciation
 Depletion Method of Depreciation
 Basis of Use System of Depreciation
 Depreciation Of Various Assets
 Depreciation Accounting – General Questions and Answers
Other Related Accounting Articles:
 Basic Factors of Determination of Depreciation
 Depletion Method of Depreciation
 Depreciation Methods
 Accounting For Depreciation
 Difference Between Depreciation and Fluctuation
 Sum of the Years’ Digits Method of Depreciation
 Fixed Installment Method or Straight Line Method or Original Cost Method of Depreciation
 Depreciation, Depletion and Amortization
 Depreciation Accounting – General Questions and Answers
 Sum of Year‘s Digit Depreciation Method
Recommended Books !
Or
Download E accounting book in MSword format for just 20 $  Click here to Download