Question
What is the difference between depreciation and depreciation reserve fund?
| S. No. | Basis | Depreciation | Depreciation reserve fund |
| 1. | Concept | It is the loss of value of fixed assets in use, on account of normal wear and tear. | It is a provision of funds created by producers to cope up with depreciation losses. |
| 2. | Effect | It leads to correct computation of profit. | These funds are used for the replacement of fixed assets when these are worn out. |
| 3. | Reason | Expected or foreseen obsolescence, normal wear and tear. | Obsolete/ outdated assets need to be repalced. |
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| Income | Consumption | MPC | APS |
| 0 | 40 | - | - |
| - | 120 | 0.8 | - |
| - | 200 | 0.8 | - |
| - | 280 | 0.8 | - |