Why does land not depreciate

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The person petty cashier is given an amount in advance of expenditure. Skip to content. Roger Davies Short Answer: Land generally does not depreciate in value because it is a limited resource with an infinite life and can be used for a range of purposes. For example, a company's land, as well as any structures erected on it, furniture, machinery, and equipment. In a literary sense, it does depreciate, meaning, there may be deterioration in its value, however, from an accounting point of view, we cannot pass any entries in the system for such deterioration in the name of depreciation.

In this article, we answer the question — Does Land Depreciate? Here we discuss land depreciation with examples and accounting effects with the changes in the value of land. You may learn more about accounting basics from the following articles —.

Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Free Accounting Course. Login details for this Free course will be emailed to you. Forgot Password? Article by Madhuri Thakur. Does Land Depreciate? If a graph is drawn for these values it would be like: You are free to use this image on your website, templates etc, Please provide us with an attribution link How to Provide Attribution? Leave a Reply Cancel reply Your email address will not be published.

This is a disputative question in the minds over many years. Many accountants debate on the increasing value of the property.

It is not a fact that only the value of the buildings increases but it is actually the land component of the property that is not depreciated. That makes it remarkable among all assets. Because of this reason, depreciation is prohibited only for lands. However, almost all fixed assets have a useful life but they do not produce a good income for the organizations. So, they are depreciated during this useful life which decreases the cost of their expenses.

Land has no definitive useful life, so there is no real way to devalue it. Because of a small and inadequate amount of lands, their value keeps increasing with time, whereas the value of other fixed assets decreases. When someone buys a land with some sort of construction on it, the price will be divided into the land and the construction.

In that case, the value of that construction will be depreciated but not the land.