Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Does charging depreciation means the costs

Atharv Sankliya (1323 Points)

10 June 2022

does charging depreciation means the costs of machinery/assets used in an year ?

Reply
Follow
Share

6 Replies

sabyasachi mukherjee (27113 Points)
Replied 10 June 2022

Depreciation is an inflow fundamentally.Amount set aside from the cost to take care of repairs or increase the useful life of the asset.

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

MPR Sanjay Kumar (3100 Points)
Replied 10 June 2022

What is mean by projection in Accounting??? and provisional

Kev Men (756 Points)
Replied 10 June 2022

@ MPR Sanjay Kumar

Projection is when you 'project' the financial statements for a future period say more than 3 years. This is based on previous data of last say 5 years.

Provisional is when the financial statements for the immediate period is 'almost' ready. This might need some minor adjustments. This is more realistic than projected as the period is just completed but minor changes/adjustments might be required or auditor's approval might be required.

So in comparison, provisional is much more realistic than projections as the projections are of future periods based on past years.

1 Like

MPR Sanjay Kumar (3100 Points)
Replied 10 June 2022

Thank you sir

sabyasachi mukherjee (27113 Points)
Replied 11 June 2022

Projection is a seperate concept undertaken to extrapolate the entire balance sheet of a concern either for the following reasons;
1. use it as a tool for future projects.
2. to be used as a tool for financial institutions.

Upgrade to CAclubindia Pro. Subscribe Now!

Yasaswi Gomes new (Finance ) (4492 Points)
Replied 30 January 2023

Depreciation is a charge and not a cost. That is why it is added back to operating cash flows and other gains like forex gains which aren't realised yet. However, costs incurred are subracted like taxes paid