dear sir, suppose i have car and i m providing depreciation @ 20% then why is it needed to make provision on it .. ?
2 Replies
CA Ganesh Agarwala
(Audit Senior Manager)
(239 Points)
Replied 30 June 2012
dear akash,
it is not compulsory to make provision if you are not a company. you can pass entry.
depreciation a/c-------- dr
to machinary a/c
provision is made to give the effect of depreciation separately. and to show the assets at cost
cheers
ganesh agarwala
work is worship
(Service)
(2728 Points)
Replied 30 June 2012
As per the Companies Act, it is required that the Assets of the company on book value be shown first and then from that the Provision of depreciation be deducted in order to arraive at value of asset as on balance sheet date.
This is a correct way of presentation as required by the ACT.
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