What I like about writing these articles is the research it takes for accuracy and current terminology. For many years I was taught that accrued depreciation was depreciation from all causes, which consists of physical deterioration, functional obsolescence and external (locational and economic) obsolescence. This term is also used with those who value businesses within an accounting practice. However, little did I realize, the term accrued depreciation is no longer used. In its place is just the simple word depreciation. Calculating depreciation is the most misunderstood concept in the cost approach.

Of the three forms of depreciation- physical, function and external, the easiest to calculate is physical deterioration.