Why is depreciation charged by business, which makes losses?

Why is depreciation charged by business, which makes losses?
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1 Answer

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.
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Related questions

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

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

Why depreciation is charged to an asset?

Description : Why depreciation is charged to an asset?

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

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

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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.

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

Give equation for calculating depreciation under straight-line method.

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

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

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

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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.

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

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

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