The depreciation is a non-charge, ie., a charge of depreciation reduces profit avail for distribution without reducing the avail cash. The cash thus retained in the business is intended to be used for replacement of the depreciable assets. For this reason section 205 of Company Act 1956 provides that Co. can pay dividend only out of profit avail after charging deprecition.
My question is that dividend is declared only after the charging the deprecition ,so here actually the avail cash is reducing bcoz of deprecition.So how the first line is applicable?
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