Why depreciation is charged to an asset?

Why depreciation is charged to an asset?
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1 Answer

Answer :

As per Accounting Standards, it is a good practice to show the capital expense every period i.e. period wise. Thus, profits will be evenly shared in each period.
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Related questions

Is depreciation charged to reduce profits or to reduce the value of asset during a financial year?

Description : Is depreciation charged to reduce profits or to reduce the value of asset during a financial year?

Last Answer : It is charged to reduce value of asset.

Why is depreciation charged even in the year of loss?

Description : Why is depreciation charged even in the year of loss?

Last Answer : Depreciation process does not depend on Profit/Loss, it is mandatory to charge depreciation as expense on Asset is distributed

Why is depreciation charged by business, which makes losses?

Description : Why is depreciation charged by business, which makes losses?

Last Answer : If I hide Depreciation for showing higher profits even if organization is in loss, I may end up paying Tax too. Which will in fact reduce my margin for profit. It will be better to show depreciation and claim tax benefit.

Give journal entry for adjusting profit made due to change in method of depreciation.

Description : Give journal entry for adjusting profit made due to change in method of depreciation.

Last Answer : It can only be achieved by reducing rate of Dep retrospectively.

What is retrospective change in depreciation method?

Description : What is retrospective change in depreciation method?

Last Answer : It means change in accounting policy such that it was present from starting.

What is prospective change in depreciation method?

Description : What is prospective change in depreciation method?

Last Answer : Prospective Change means the effect of accounting estimate and new policy is from current date and in future entry.

Give equation for calculating depreciation under reducing balance method.

Description : Give equation for calculating depreciation under reducing balance method.

Last Answer : Dep per annum= (NBV- Salvage)*rate;

Give equation for calculating depreciation under straight-line method.

Description : Give equation for calculating depreciation under straight-line method.

Last Answer : Dep per annum= cost-salvage/useful life;

How does physical wear and tear result in depreciation?

Description : How does physical wear and tear result in depreciation?

Last Answer : Physical Wear/Tear tend to worn out the Asset decreasing its productivity over period. Thus, market value decrease for the asset.

What are the features of depreciation?

Description : What are the features of depreciation?

Last Answer : 3.1 Net Book value will decrease for asset. 3.2 Includes loss of value due to usage, obsolescence. 3.3 Continuing Process. 3.4 Must be deducted before calculation taxable profits, as this is an ... then taxable profit is 50000 - 10000 = 40000 INR. 3.5 Does not include any actual cash flows.

What are the different causes of depreciation?

Description : What are the different causes of depreciation?

Last Answer : Wear and Tear; as over a period if asset is utilized it will be damaged and repair may be needed.

What is depreciation?

Description : What is depreciation?

Last Answer : Defined as reduction in value/cost of asset in systematic Manner

What do you mean by exhaustion of an asset?

Description : What do you mean by exhaustion of an asset?

Last Answer : When useful life for asset is zero or Asset is fully depreciated.

What is scrap value?

Description : What is scrap value?

Last Answer : Also known as residual/salvage value. The value means below which depreciation cannot be applied or in simpler terms assets useful life is over.

Why fixed instalment method is also called as straight-line method?

Description : Why fixed instalment method is also called as straight-line method?

Last Answer : As name suggests the depreciation amount is same each period so it is called fixed installation/straight line.

What do you mean by obsolescence?

Description : What do you mean by obsolescence?

Last Answer : When new model for asset procured/installed earlier is released the previous asset market value decreases. This is Obsolescence.

In which case depletion of assets takes place?

Description : In which case depletion of assets takes place?

Last Answer : Just like depreciation, depletion is accounting concept popularly utilized for tangible objects like Mineral Gas, Timber etc. where wear/tear for asset is not there. In these cases the followinf formula is used:

What is the major difference between 'Depreciation on Asset' and 'Impairment of Asset' ?

Description : What is the major difference between 'Depreciation on Asset' and 'Impairment of Asset' ?

Last Answer : Depreciation of assets in the allocation of assets whose value is placed on the balance sheet. It is a kind of tangible asset that may incur a cost. While Impairment of assets in the assets of ... the balance sheet. They are usually long-term assets. The longer the span the greater the impairment.

Depreciation need not be provided if the asset is not in use.

Description : Depreciation need not be provided if the asset is not in use.

Last Answer : State True or False with reason : Depreciation need not be provided if the asset is not in use.

There is no need to provide depreciation if the asset is maintained with care.

Description : There is no need to provide depreciation if the asset is maintained with care.

Last Answer : State whether the following statement are True or False with reason : There is no need to provide depreciation if the asset is maintained with care.

(i) The method of charging depreciation under which depreciation is calculated on the original cost of an asset.

Description : (i) The method of charging depreciation under which depreciation is calculated on the original cost of an asset.

Last Answer : Write the word/term/phrase which can substitute each of the following statements: (i) The method ... , etc. incurred for the erection of machinery.

Depreciation = cost of Asset (-)........./Estimatedlif of Asset

Description : Depreciation = cost of Asset (-)........./Estimatedlif of Asset

Last Answer : Depreciation = \(\cfrac{cost\,of\,Asset(-)........}{Estimated\,life\,of\,Asset}\) (a) ... b) Scrap value (c) Installation charges (d) months

By the amount of depreciation the value of asset __________ 

Description : By the amount of depreciation the value of asset __________ 

Last Answer : By the amount of depreciation the value of asset __________ (a) decreases (b) increases (c) becomes zero (d) remains constant

How does asset depreciation affect my tax burden?

Description : How does asset depreciation affect my tax burden?

Last Answer : Asset Depreciation will decrease your tax amount owed. If you have assets that have decreased in value and qualify, you can file the loss on your taxes and be credited that amount toward your tax bill.

Which of the following is most likely to require special planning considerations related to asset valuation? a. Accelerated depreciation methods are used for amortizing the costs of factory equipment. b. The client has recently purchased an expensive copy machine. c. Assets costing less than P5,000 are expensed even when the expected life exceeds one year. d. Inventory is comprised of diamond rings.

Description : Which of the following is most likely to require special planning considerations related to asset valuation? a. Accelerated depreciation methods are used for amortizing the costs of factory equipment. b. ... even when the expected life exceeds one year. d. Inventory is comprised of diamond rings.

Last Answer : Inventory is comprised of diamond rings.

In declining balance method of depreciation calculation, the (A) Value of the asset decreases linearly with time (B) Annual cost of depreciation is same every year (C) Annual depreciation is the fixed percentage of the property value at the beginning of the particular year (D) None of these

Description : In declining balance method of depreciation calculation, the (A) Value of the asset decreases linearly with time (B) Annual cost of depreciation is same every year (C) Annual depreciation is the fixed percentage of the property value at the beginning of the particular year (D) None of these

Last Answer : (C) Annual depreciation is the fixed percentage of the property value at the beginning of the particular year

If the block of asset ceases to exist on the last day of the previous year, depreciation admissible for block of assets will be: a) Nil b) 50% of the value of the block of assets on the first day of the previous year c) The total value of the block of the assets on the first day of the previous year d) 50% of the value of the block of assets on last day of the previous year

Description : If the block of asset ceases to exist on the last day of the previous year, depreciation admissible for block of assets will be: a) Nil b) 50% of the value of the block of assets on the first day ... of the previous year d) 50% of the value of the block of assets on last day of the previous year

Last Answer : a) Nil

If the asset is revalued then depreciation u/s 98 shall be allowed on a) Original amount b) Revalued Amount c) At fair value of similar asset d) Market Value-Notional Depreciation

Description : If the asset is revalued then depreciation u/s 98 shall be allowed on a) Original amount b) Revalued Amount c) At fair value of similar asset d) Market Value-Notional Depreciation

Last Answer : a) Original amount

Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 June 2017 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 lakh on 14 January 2018. Rate of depreciation of block is 10%. Calculate the amount of depreciation available during the previous year for the block. e. rupees 1.95 lakh f. rupees 2.5 lakh g. rupees 2.25 lakh h. Rs 1.45 lakh

Description : Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 June 2017 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 ... . rupees 1.95 lakh f. rupees 2.5 lakh g. rupees 2.25 lakh h. Rs 1.45 lakh

Last Answer : e. rupees 1.95 lakh

Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 January 2018 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 lakh on 14 January 2018. Rate of depreciation of block is 10%. Calculate the amount of depreciation available during the previous year. a. rupees 1.95 lakh b. rupees 2.5 lakh c. rupees 2.25 lakh d. Rs 1.45 lakh

Description : Opening WDV off the block of assets was Rs 15 lakh. During the year, asset was acquired under this block on 15 January 2018 amounting to rupees 10 lakh. One of the assets falling within the block was sold for rupees 5.5 ... rupees 1.95 lakh b. rupees 2.5 lakh c. rupees 2.25 lakh d. Rs 1.45 lakh

Last Answer : d. Rs 1.45 lakh

Depreciation when the asset is used for less than 180 days during the year of acquisition shall be at Block rate of: a) 50% b) 100% c) 20% d) 15%

Description : Depreciation when the asset is used for less than 180 days during the year of acquisition shall be at Block rate of: a) 50% b) 100% c) 20% d) 15%

Last Answer : a) 50%

If the asset acquired outside India by a non-resident is brought by him to India & used for business, then in that case what shall be the cost of addition? a) Value of the asset at the time of bringing the asset to India less depreciation b) Actual cost of asset less actual depreciation c) Actual cost of asset less notional depreciation d) Any of the above

Description : If the asset acquired outside India by a non-resident is brought by him to India & used for business, then in that case what shall be the cost of addition? a) Value of the asset at the ... of asset less actual depreciation c) Actual cost of asset less notional depreciation d) Any of the above

Last Answer : c) Actual cost of asset less notional depreciation

Opening WDV of the block of assets was Rs.15 lakh. During the year, asset was acquired under this block on 15th June2017 amounting to Rs. 10 Lakh. Rate of depreciation of the block is 15%. Calculate the amount of depreciation available during the P.Y. a) Rs. 3.5 Lakh b) Rs. 3.75 lakh c) Rs. 3.00 lakh d) Rs.2.25 Lakh

Description : Opening WDV of the block of assets was Rs.15 lakh. During the year, asset was acquired under this block on 15th June2017 amounting to Rs. 10 Lakh. Rate of depreciation of the block is 15%. Calculate the amount of depreciation ... 3.5 Lakh b) Rs. 3.75 lakh c) Rs. 3.00 lakh d) Rs.2.25 Lakh

Last Answer : b) Rs. 3.75 lakh

At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is A) Transferred to Depreciation Account B) Transferred to the Asset Account C) Transferred to Profit and Loss Account D) Simply deducted from the asset in the Balance Sheet

Description : At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is A) Transferred to Depreciation Account B) Transferred to the Asset Account C) Transferred to Profit and Loss Account D) Simply deducted from the asset in the Balance Sheet

Last Answer : Answer: D

Depreciation is always charged on __________ assets. 

Description : Depreciation is always charged on __________ assets. 

Last Answer : Depreciation is always charged on __________ assets. (a) Current (b) Fixed (c) Fictitious (d) Intangible

Under the Reducing Balance, method depreciation is charged on the original cost.

Description : Under the Reducing Balance, method depreciation is charged on the original cost.

Last Answer : State whether the following statement are True or False with reason : Under the Reducing ... method depreciation is charged on the original cost.

What is the rate of depreciation charged on Computer Software: a) 10% b) 60% c) 40% d) 15%

Description : What is the rate of depreciation charged on Computer Software: a) 10% b) 60% c) 40% d) 15%

Last Answer : b) 60%

Under the Income Tax Act 1961, Depreciation on machinery is charged on : a) Purchase Price of the machinery b) Market Price of the Machine c) Written Down value d) A or B which is less

Description : Under the Income Tax Act 1961, Depreciation on machinery is charged on : a) Purchase Price of the machinery b) Market Price of the Machine c) Written Down value d) A or B which is less

Last Answer : c) Written Down value

Depreciation under ICDS-V shall be charged in accordance with : a) Income Tax Act 1961 b) Companies Act 2013 c) Notified Rate –CBEC d) Straight line over the useful life

Description : Depreciation under ICDS-V shall be charged in accordance with : a) Income Tax Act 1961 b) Companies Act 2013 c) Notified Rate –CBEC d) Straight line over the useful life

Last Answer : a) Income Tax Act 1961

which method almost always produces the most depreciation in the first year? -General Knowledge

Description : which method almost always produces the most depreciation in the first year? -General Knowledge

Last Answer : B. ​Double-declining-balance.

why Novelty Chemicals bought a Motor Vehicle for$110,000 on January 5, 2016. The estimated usefullife of the vehicle is ten years. The disposal valueis estimated at $10,000. Annual depreciation is onthe straight line method?

Description : why Novelty Chemicals bought a Motor Vehicle for$110,000 on January 5, 2016. The estimated usefullife of the vehicle is ten years. The disposal valueis estimated at $10,000. Annual depreciation is onthe straight line method?

Last Answer : Novelty Chemicals bought a Motor Vehicle for$110,000 on January 5, 2016. The estimated usefullife of the vehicle is ten years. The disposal valueis estimated at $10,000. Annual ... for annualdepreciation.d) The Balance Sheet extracts for motor vehicle and itsrelated depreciation.full question

Property Depreciation Because What ?

Last Answer : Usage Loss , time Passed To be , accidentally Depreciation.

(i) Fixed Installment Method of depreciation is also known as _________ cost method.

Description : (i) Fixed Installment Method of depreciation is also known as _________ cost method.

Last Answer : Complete the following sentence : (i) Fixed Installment Method of depreciation is also known as ... year. (v) Depreciation is ________ expenses.

(i) ___________ is the major cause for Depreciation.

Description : (i) ___________ is the major cause for Depreciation.

Last Answer : Complete the following sentence : (i) ___________ is the major cause for Depreciation. (ii) ... cost concept is use for depreciation of Assets.

Which method of depreciation would you suggest for depreciating a five years lease?

Description : Which method of depreciation would you suggest for depreciating a five years lease?

Last Answer : Which method of depreciation would you suggest for depreciating a five years lease?

Under which method of depreciation does the number of depreciation change every year?

Description : Under which method of depreciation does the number of depreciation change every year?

Last Answer : Under which method of depreciation does the number of depreciation change every year?

Under which method of depreciation the amount of depreciation remains constant every year?

Description : Under which method of depreciation the amount of depreciation remains constant every year?

Last Answer : Under which method of depreciation the amount of depreciation remains constant every year?

Under the __________ system of depreciation, the amount of depreciation does not change from year to year. 

Description : Under the __________ system of depreciation, the amount of depreciation does not change from year to year. 

Last Answer : Under the __________ system of depreciation, the amount of depreciation does not change from year to year. ... (c) Depletion (d) Machine Hour Rate

Under ____________ method depreciation is calculated on written down value.

Description : Under ____________ method depreciation is calculated on written down value.

Last Answer : Under ____________ method depreciation is calculated on written down value. (a) Fixed Instalment (b) ... Balance (c) Revaluation (d) Depletion

In fixed instalment system the amount of depreciation is ____________ every year. 

Description : In fixed instalment system the amount of depreciation is ____________ every year. 

Last Answer : In fixed instalment system the amount of depreciation is ____________ every year. (a) constant (b) fluctuating (c) increased (d) decreased