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Anuj Jain (pqr) (94 Points)

15 October 2012

can anyone tell me that why do we show depreciation on plant and machinery in p/l a/c . it should be shown in trading a/c as all the expenses related with factory are recorded in trading a/c ,,,,,,,,,,,,

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3 Replies

Deepak kumar sharma (Govt. job) (2946 Points)
Replied 15 October 2012

All direct expenses are shown in trading A/c whereas all indirect expenses are shown in Profit and loss A/c.

since depreciation is an indirect expense, hence it is shown in p & l A/c

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CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 15 October 2012

in trading account we show expenses which are directly related to purchase of goods (remember we are talking about trading a/c and not manufacturing a/c)..deprwciation is factory expense but not raletd to purachase of goods/materials..hence its debited to p/l instead of trading a/c..and now this question of urs is kind of irrelevant as we now have a format for p/l a/c as per revised schedule VI.pls go thru it.

Anuj Jain (pqr) (94 Points)
Replied 15 October 2012

pooja ji if we expenses related with purchase are charged in trading a/c than why do we charge expense of fuel, coal etc.in trading a/c ,they are not related with the purchase of goods.

actually my view on this querry is that................

WHEN IT IS NOT GIVEN THAT WHETHER THE FIRM IS MANUFACTURING OR TRADING THAN WE ASSUME IT TRADING AND IN CASE OF TRADING FIRM PALNT AND MACHINERY MEANS OFFICE EQUIPMENTS AND ITS DEPRECIATION IS SHOWN IN P/L A/C BUT IF IT IS GIVEN THAT THE FIRM IS MANUFACTURING THAN WE HAVE TO CHARGE DEPRECIATION ON PLANT AND MACHINERY( USED IN PRODUCTION) IN TRADING A/C............

ANY EXPERTS COMMENTS ARE WELCOME