Why depreciation is charged in P&L Account?
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Answer / deepa
The permanent decreases in the value of fixed assets
because of their use in the business is called
Depreciation. The value lost on the fixed asset is a
business expense.So its charged in P&L account.
| Is This Answer Correct ? | 111 Yes | 8 No |
Answer / hemanth.n.s
Firstly, it is mandatory for every company to provide for
depreciation in the books of account before declaring
dividend.
Secondly it is a nominal account. The concept being to make
good the value of fixed asset on a particular balance sheet
date.
| Is This Answer Correct ? | 31 Yes | 6 No |
Answer / krishnachaitanyanellore
Depreciation is the continuous decrease in the value of the
asset.Depreciation can be considered both as an expense and
as a source of revenue.
Expense:Because the value of the asset is decreased
resulting in some loss, it is posted in P&L account.
Source of revenue:Depreciation when posted on the debit side
of the P&L account, the profit is decreased. In other way,
the profits that should be distributed among the
shareholders gets decreased.It means that the residual is
placed in the business itself.
| Is This Answer Correct ? | 27 Yes | 5 No |
Answer / jay kumar
depreciation will charged because one thing it is a revenue
expenditure , second thing it will charged because to
decrease the net profit, as per IT dep will decrease from
assets & net profit.
than only actuall profit will shown in balance sheet, and
assets will show actuall values
| Is This Answer Correct ? | 7 Yes | 1 No |
Answer / rakesh
Depreciation is a revenue expenditure.
It is beneficial for the company as it can help to
ascertain the amount of capital needed to be kept apart for
future for investment in capital assets. As every thing has
a life span and at the end of its useful life it needs to
be replaced or repaired. If the value of such assets is
written down on the day when they are rendered useless than
the profits in that year will be lowered significantly so
it had been decided to provide for depreciation on such
assets and to write off them annually and hence its revenue
expenditure and as we know revenue expenditure are charged
to P & L Account. Hence Depreciation is charged to P & L
Account.
| Is This Answer Correct ? | 5 Yes | 1 No |
Answer / ranadheer
Depreciation is reduction in the value of asset (or)
decrease in the value of asset due to wear and tear.
Depreciation is loss for the company. According to nominal
rule Debit all expenses and losses so Depreciation is
debited to profit&loss account
| Is This Answer Correct ? | 4 Yes | 0 No |
Answer / ratna
Depreciation is decrease in the value of an asset.Depreciation is charged due to physical wear&tear,technological obsolesence,and its life time..if we are not providin depreciation,the profits shown in p&l wil be more than the actual profits.Even though depreciation is an expense,there is no actual out flow of cash.
| Is This Answer Correct ? | 3 Yes | 0 No |
Answer / n.shankar nath, sr. accountant
Fixed assets are held for the services they yield in the
production of other goods & services called fixed asset,
while getting the finished goods asset value will decrease
year to year i.e. called depreciation it's nothing but
expenditure.
Secondly it's a nominal account, expenses & loses debit &
income & gains credit, that's why depreciation will treat
as expenditure & post into P& L Account
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / harika r
I would say the purpose of charging depreciation to P & L
a/c are
1. Unless a proper charge on account of depreciation is
included in P & L a/c, the true cost of manufacture of
different products will not be ascertained.
2. Depreciation is an expense incurred for earning profit,
which is similar to the hire of an asset, the only
difference being that in one case the amount is paid to an
outsider while, in the other, it is kept in the entity
itself.
3. If depreciation had not been charged, the net income
would have been overstated over the years of the life of
the asset, and if the same was withdrawn or distributed as
dividends, the business would have no funds for the
replacement of the asset.
| Is This Answer Correct ? | 2 Yes | 0 No |
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