Provision of depreciation account

Hi Atif,

Depreciation is an amount set aside from the value of the Fixed assets each year. You can either reduce this amount form the value of the asset and show it at the net or accumulate the depreciation amount in the Provision for Depreciation and show the asset value at Gross.

I greatly enjoyed answering your question.

Thought it would be interesting to connect on LinkedIn for more such discussions https://www.linkedin.com/in/ca-tapasya-bakshi-50545491/

@ Tapasya & Atif,

I don’t see the point in providing for depreciation while it is a charge. An economic benefit is any source of income or benefits coming into the firm. It is usual for a machinery to depreciate. The provision meaning is defined as an uncertain liability of uncertain timing which has a reliable estimate. But depreciation is certain and it is not a liability. Maybe, they need these ledgers to hold an amount. But, I checked INDAS 16 and there is no mention of providing for depreciation and no accounting treatment.