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Depreciation

Is provision for depreciation is current liability? In case it is current liability then what is the reason


Akshay jerry

Akshay jerry

CA Inter

10

27-Aug-20 08:46

26

Answers (2)

Not strictly a current liability nor is it a long term liability. It write down the values of a fixed current asset and for presentation purposes the provision is normally netted off the asset so that the net book value of the asset is shown on the balance sheet. The provision on depreciation account is not a nominal account, it is a part of the asset account. Also note that it will always show a credit balance and that its balance will increase each year. At any given time, the balance on provision for depreciation account represents the total accumulated depreciation that has been provided against the particular asset.


Lavanya Chitturi

Lavanya Chitturi

Moderator

27-Aug-20 13:10

Under classification of accounts there are i) personal a/c's ii) Real a/c's iii) Nominal a/c's iv) valuation a/c's Here your doubt is about valuation a/c's These are the accounts which are created to show assets or liabilities at their original values (for clear presentation of financial statements). These accounts doesn't have any nature of assets or liabilities but they are just opposite to their original or source accounts (in terms of posting entries like debit and credit). Examples are prov for dep, prov for bad and doubtful debts, reserve for creditors etc., If clearly shows what is the cost at which it is purchased and accumulated depreciation details.... Hope it helps!!!


VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Foundation

850

27-Aug-20 16:36

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