Balance sheet depreciation

Instead of deducting from asset, Create Provision for depreciation account and each time you provide depreciation then debit to Profit and Loss account and credit provision for depreciation account and shown under Liabilities side of Balance sheet. This assertion is valid for only Non-Corporate assessee as Companies are not allowed to show Gross assets values in their Balance sheets as per Companies act, 2013

However the financial statements made in accordance with the view of Swami ayyappa nuli sir is not in accordance with the GAAP ( generally accepted accounting principles. You could revalue the assets by fair valuing itas per accounting standard 10. Or provide for impairment loss as per accounting standard 28.

But putting it under liabilities side will reduce a balance sheet. How can a company keeps its balance sheet intact? Is it compensated with depreciation and amortization value which is deducted from P&L account to the assets side of a balance sheet?

if the company is profit making than you dont worry about balance shhet's asset side

from profit either company may have invested in other assets or in bank balance increase 

if company is loss making den vice versa means they have redeemed

plus as per AS 6, 10, 28 It is clearly said 

book value

-

depreciation

-

impairment if any

we have to show

I think what you are asking, is about the issue of capital maintenance. The purpose of depreciation is manifold:

1. Matching principle - amortising the cost of an asset over the accounting periods during which its benefits will be derived.

2. Replacement of assets - to set apart a portion of profit for replacement of assets at the end of their lives, so as to ensure the capacity isnt drastically reduced at the end of its life, and consequently affect going concern.

3. In taxation - an allowance to encourage investment, compensating a business for the time value of money (so no indexation on depreciable asset)

 

Capital maintenance - in point 2 above. When depreciation is provided each year, it reduces the profit distributable to owners. There is no cash outflow as a result of this charge to profit. So theoretically, at the end of an asset's useful life, enterprise has set apart from profits, an amount covering "depreciable value", it can sell the asset for "residual value" and, theoretically, have a cash balance to buy a new asset. Thus, the asset side of balancesheet is kept "intact".

 

The sad part of this theory: even if all profits are realised in cash, depreciation is on historical cost of an asset and ignores its replacement cost. So it doesn't really help you replace assets. Fair value accounting is required to solve this problem.

To keep a balance sheet assets side unaffected, revaluation is the answer.

The DTA value is not affected in the balance sheet