Depriciation ?
(Guest)
Why depriciation is an indrect exp and charged to profit/loss a/c?
4 Replies
(Guest)
In simple words, Profit and Loss contains only those expenses which are NOT directly attributable to the main business activity of an enterprise/firm.
Depreciation is charged on wear and tear of Fixed Assets and cannot be directly charged to the products and services.
So, it is NOT a Direct expense and hence comes in the Profit and Loss A/c.
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 09 December 2011
In case of manufacturing concerns depreciation relating to plant& machinery used in the factory is charged to the manufacturing account as the loss is incurred directly in relation to manufacture of the goods from which the concern earns direct income.
But for other assets used in the office of the manufacturer or say in case of a trading concern having assets like cars, computers etc.. the depreciation is not incurred directly in relation to the direct income earned by the concern. But since it is used in the business of the concern it is shown as an indirect expense.
Shah Tarun
(Student)
(800 Points)
Replied 12 December 2011
As explained by Giridhar,Depreciation can be classified as direct expense if it's of asset which are directly used in manufecaturing or trading activity.
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