Accountancy

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 February 2010 Can anyone plz tel me why is provision for depreciation created and why is it deducted from the concerned asst together with the current year's depn of that asset?

CA Kapil B Gupta

CA Kapil B Gupta (Expert)
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05 February 2010 Depreciation is charged only on depreciable assets. As per Income Tax Act and Companies Act, depreciation should be debited to PNL with proper Calculations and is allowed as per rules.

Querist : Anonymous

Querist : Anonymous (Querist)

05 February 2010 Thank you for the response sir.
But i stil have a doubt regarding PROVISION for deprecition as this does not appear in most of the problems.
In a particular sum, Provn for Depn for machinery Rs.60000 as given in the Trial balance along with current yr's depn at 10% was deducted from the Depreciable asst in the Balance Sheet as follows:
Machinery
As on 1/4/08- 300000
less: Provision for depn 90000
Closing balance of machinery- 210000

Provision for depn was arrived at as under:
Opening balance of Prov- 60000
Add: current yr's depn- 30000
Total Prov deducted from machinery-90000

What exactly is Provn For Depn and why is it created?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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05 February 2010 Provision for Depreciation is the account is accumulating the every year depreciation instead of crediting assets account we are crediting the pro.depreciation account

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