Faculty of business department of accounting an assessment of fixed asset managementin the

The estimate of periodic depreciation dependents on the following three variables
1. Economic life this involves choosing the unit in which economic life is to be measured 
and estimating how many units of service are embodied in each asset.
2. Depreciation base on asset may be sold by a business enterprise before its service value 
of completely consumed, the depreciation base is the cost of asset services that will be 
used,; it usually is less than the original investment in the asset because residual value is 
subtracted from costs to arrive at the depreciation base.
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3. Method of cost allocation the problem here is to determine the amount if services that has 
expired in each accounting period. A corollary issue is to decide whether all units of 
service have and equal cost, or whether some units of service have a large or smaller cost 
than others (Berk: 1990; 98)
2.10 Estimate of Economic Life
The economic life of an asset is the total units of service expected to be derived form that asset. 
Business managers commonly measure economic life of a plant asset in terms of time units, for 
example, months or years. Economic life of a plant asset also may be measured in terms of 
output or activity, expressed in such physical unit as tops, miles, gallons, or machine hours. For 
example, the estimated economic life of a truck may be described as four year or 20,000 miles, 
forces which tend to limit the economic life of an asset should be considered in the determination 
of the type of unity of service to use for a given asset or group of assets. (Brown and Finn, 1980; 
66)
The causes of a decrease in economic life may be divided in to two broad closes; physical causes 
(including casualties), and functional.
2.10.1 Depreciation Methods Cost Allocation
When the economic life of an asset has been estimated, and its depreciation base established, 
there remains the problem of determining the portion of cost that will expire with each unit of 
economic life.
There are a number of depreciation methods that attempt of recognize these factors in varying 
degrees. They may be classified as follows.
1. Straight line method (based on expiration of time)
2. Accelerated methods (based on expiration of time )
a. Fixed-percentage of declining balance
b. Sum-of the years digits
3. Output (or units of production) method (based on physical service or production)
4. Retirement and replacement methods
5. Interest methods
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Depreciation under the straight line and accelerated methods is a function of time rather than use, 
one the other hand, depreciation under the out method is a function of actual usage rather than 
the passage of time (Berk: 1990; 204)