Q : Sir, please explain us what is depreciation, why it is used?
Ans. Depreciation is decrease in the value of any fixed asset. Actually, we show it in profit and loss account debit side. With this, our net profit decreases. But same time, our cash is not decreased. Same amount is collected for buying new fixed asset for at the time when fixed asset's working life will be completed.
Ans. Depreciation is decrease in the value of any fixed asset. Actually, we show it in profit and loss account debit side. With this, our net profit decreases. But same time, our cash is not decreased. Same amount is collected for buying new fixed asset for at the time when fixed asset's working life will be completed.