depreciation

This query is : Resolved

R.V.RAO

R.V.RAO (Querist)
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16 August 2007 MY FRIEND MR. HITESH REPLIED WELL ON WHY PROVIDE DEPR.
BUT I WONDER HOW MANY COMPANIES SET ASIDE THE AMOUNT SEPARATELY OR IN AN IDENTICAL WAY TO REPLACE THE ASSET ON BEING WORN OUT?
NOT MAJORITY COMPANIES.
SO THE QUESTION IS ECXCEPT TO REDUCE PROFITS AND PAY LESSER TAXES , THE REAL OBJECTIVE OF REPLACING AN ASSET ON BEING WORN OUT IS NOT ACHIEVED.
THUS EVEN THE CONCEPT OF CONTINUITY OF BUSINESS IS NOT FULLY ACHIEVABLE FOR A GOING CONCERN IF WE CANNOT FIND FUNDS TO REPLACE AN ASSET WHEN DUE.
IS NOT IT TIME TO MAKE IT MANDATORY TO SET ASIDE DEP. PROVIDED IN SEPARATE OR IDENTIFIABLE WAY TO COME TO OUR rescue?
regards
R.V.RAO

CA Mani

CA Mani (Expert)
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16 August 2007 Yes, It is to be made mandatory.

Raj

Raj (Expert)
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17 August 2007 Our accounting principal, companies Act always made it mandatory. And for your arguement ,Charge depreciation came in picture in a positive way that when company will replace its assets then fund will be available in the shape of PROFIT.

* But always matching concept demands it.

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