Depreciation

Depreciation is the concept. Depreciation expense is what is charged to P&L , i.e reduced from profits Provision for depreciation is the credit leg of the depreciation entry - Depreciation expense A/C Dr To Provision for Depreciation Account - Provision for depreciation is reduced from amount of Fixed assets , where as Depreciation expense is transferred to P&L Account If you disclose GFA Less: Dep prov = NFA approach of disclosure in Balance sheet ( which is what is recommended) - You show historical Gross Fixed assets value of all fixed assets and reduce it with accumulated sum of depreciation provisions amounts - this sum of accumulated depreciation provisions may sometimes be referred to as accumulated depreciation

Sriram Somayajula

Admin

13-Sep-20 07:53

I dint understand sir

Thread Starter

Shruthi V

CA Inter

★ 0

13-Sep-20 20:20

Cost of the asset is spread over through out its useful life(working life). The portion of cost of asset that is allocated to a particular period is called depreciation. Depreciation is an estimate on some suitable basis because technically it is not possible to determine the exact remaining useful life of asset at the end of a period (As Wear and tear of machine depends upon many factors). Provision for depreciation and accumulated depreciation are same they are created for fair presentation of balance sheet. So that asset can be shown at original value at which it is purchased and total depreciation till date. Provision for depreciation is cumulative depreciation year after year. Hope it helps!!!

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

14-Sep-20 02:07