Depriciation

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mint

mint (Querist)
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16 August 2007 hi why we are charging depriciation on assets

CA. Hitesh Aggarwal

CA. Hitesh Aggarwal (Expert)
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16 August 2007 Mr. Bharat we charge depericiation on assets because as u know every thing get depreciated because of lapse of time or use and after a time that asset get so much depreciated that it cant use and that time that asset require replacement and we require money to replace that asset but it is not possible every time to purchase the asset at the time of its disposal because of finance limitations and other reasons. So it is better to set aside some part of profit every year and accumulate it to replace the disposable asset at the time of disposal of asset. Beside this in accounts we have matching concept so it is an expense to earn the income and that should be charged against the income earn by using the assets.