What are the purpose of depreciation?
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Depreciation is a business expense.It should be charged to revenue irrespective of whether there is profit or loss. The object of charging depreciation are.
- To arrive at the true working result,net profit or net loss.
- To show the asset at its proper value, that is at cost less depreciation loss.
- To retain,out of profits, funds for the replacement of the asset at the end of its working life.
- In order to comply the law of companies act. You have to charge depreciation on the fixed asset as per rate provided.