Why depreciation is charged in P&L Account?
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Answer Posted / rakesh
Depreciation is a revenue expenditure.
It is beneficial for the company as it can help to
ascertain the amount of capital needed to be kept apart for
future for investment in capital assets. As every thing has
a life span and at the end of its useful life it needs to
be replaced or repaired. If the value of such assets is
written down on the day when they are rendered useless than
the profits in that year will be lowered significantly so
it had been decided to provide for depreciation on such
assets and to write off them annually and hence its revenue
expenditure and as we know revenue expenditure are charged
to P & L Account. Hence Depreciation is charged to P & L
Account.
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