What is the nature of provision for depreciation account?
ATIF MOHAMMAD (6 Points)
24 May 2020What is the nature of provision for depreciation account?
TAPASYA
(CA)
(297 Points)
Replied 24 May 2020
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.
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yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 25 May 2020
@ 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.
Rohit Agarwal
(64 Points)
Replied 03 June 2020
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