03 December 2020
Suppose one business man sale for first year is Rs. Ten Lakh & Net Profit @ Ten Percent for Rs. One Lakh.
Second year purchase furniture for Rs. Fifty Thousand from last year Profit. Depreciation on furniture @ Ten percent for Rs. Five Thousand debited to profit & loss a/c. Due to furniture is purchase from last year that’s why depreciation debited to Reserve & Surplus. Lots of people say depreciation of this year expenses, I agree but in profit & loss account only depreciation is single expenses is not paid for the year or not payable for next year. Now position is year end Furniture value is Rs. Forty Five Thousand & Business Man collect money from market for this furniture is Rs. Fifty five Thousand. This gap is increase every year. Business Man show compering to last year profit is ratio is decrease that why business man decrease expense or increase sale price, that why Unemployment or Dearness is increase every year.
03 December 2020
Depreciation is an expense payment for which is paid at the time of purchase. Yearly expenses will go up hence prices go up and due to inflation dearness increase every year.
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