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what is motive behind create depriciation reserve? how to
pass journal entry in case of depriciation reseve?and how
it shows in the books of co.
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Answer Posted / anudeep
depreciation can be treated as in two ways one is deducted
from asset and other one is shown as liabibility.
if depreciation is deducted from the concerned asset. then
the balance sheet value asset does not show original cost
the reason why depreciation is treated as depreciation
reserve is to show the asset in the balance sheet as cost
value i mean historical cost we hav to provide depreciation
reserve
any way whether we are deducted from asset or creation of
liability i mean dep reserve the motive of depreciation is
replacement of assets after certain period.
the jounal entry will be like this
depreciation A/c dr
to dep reserve a/c
for transfer to profit and loss account
profit and loss A/c dr
to depreciation account
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