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It is use decrease income tax
Expense out asset value over the period
The main objective of providing depreciation to the concerned property are as follows
1. To ascertain true profit of the business.
2. To show the proper value of assets.
3. To retain the capital In tact.
4. Provision of depreciation is a statutory need for the business
As per IFRS - IAS 16 — Property, Plant and Equipment - IAS Plus , The objective of Depreciation expense is to represents the consumption of the assets ,service potential in the period.
the objective of depreciation is to apportion the cost of an asset over its useful life because the asset will be used more than one year. it is an contrast with other expenses which is used for a single period and we charged hole amount once to income statement (Statement of profit and loss)
The purpose of depreciation is to match the cost of a productive asset (that has a useful life of more than a year) to the revenues earned from using the asset. Since it is hard to see a direct link to revenues, the asset's cost is usually allocated to (assigned to, spread over) the years in which the asset is used. Depreciation systematically allocates or moves the asset's cost from the balance sheet to expense on the income statement over the asset's useful life. In other words, depreciation is an allocation process in order to achieve the matching principle; it is nota technique for determining the fair market value of the asset.The accounting entry for depreciation is a debit to Depreciation Expense and a credit to Accumulated Depreciation (a contra-asset account that is reported in the same section of the balance sheet as the asset that is being depreciated).
from my point of view.
1. for repalce of existing machine.
2.for calculation of real value of assets
3.for tax deduction
The Main Objective of depreciation is to Allocate Asset Contribution Cost which help in Business operation in each specific Financial period. Thanks
It usually gives an indication to how much Capital Expenditure is needed to keep your assets running at full efficiency.
To allocate Capital Expenditures in each and every month as per the percentage settled in system and prescribed by GAAP to the defferent period till the the assets fullly depreciated.
The main objective of providing depreciation to Fixed assets (applicable) are:
1. To ascertain true profit of the business, apportion the wear & tear of the machinery.
2. To show the present book value of the machinery in the books of accounts.
3. To keep a reserve from P&L account by way of depreciation towards replacement of asset at the end of the asset life.
The purpose of depreciation is to spread out or to apportion the cost of an asset over several financial statements. The most commonly used method of depreciating asset is the straight line method where time is used to depreciate an asset regardless of usage.
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