What is the need of Depreciation Account? is it a useful tool for financial statements?

depreciation is important to show the assets in its real value after usage and passage of time

Depriciation is the allocation of Fixed Assets Cost over the period of its useful life. we can say it in a easy way to account for the assets cost in a way that it may reflect in the income statement on yearly basis, or assets life cycle costing. 

A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.

Derpreciation is an expense, being usage of the depreciable capital asset.Depreciation is necessary to arrive at the correct profitability of the company.

According to Conceptual framework, assets should not be overstated (basic principle). So IAS -16 also provide guidance about charging of depreciation. It states that 'Depreciation is the allocation of cost of an asset over its useful life. Now come to the Question, during the finalization of F/S, you have to comply with all the standards and IAS -16 provides details on it. External auditors also provide assurance that F/S are prepared in accordance with all the accounting principals/ policies and practices. 

The Need for depreciation arises for the following reasons:

Ascertainment of True Profit or Loss:

Depreciation is a loss. So Unless it is considered like all other expenses and losses, true profit or loss cannot be ascertained. In other words, depreciation must be considered in order to into out true profit or loss of a business.

Ascertainment of True Cost of Production:

Goods are produced with the help of plant and machinery which incurs depreciation in the process of production. This depreciation must be considered as a part of the cost of production of goods. Otherwise, the cost f production would be shown less than the true cost. Sales price is fixed normally on the basis of cost of production. So, if the cost of production is shown less by ignoring depreciation, the sale price will also be fixed at low level resulting in a loss to the business.

True Valuation of Assets:

Value of assets gradually decreases on account of depreciation, if depreciation is not taken into account, the value of asset will be shown in the books at a figure higher than its true value and hence the true financial position of the business will not be disclosed through balance sheet.

Replacement of Assets:

After sometime an asset will be completely exhausted on account of use. A new asset must then be purchased requiring a large sum of money. If the whole amount of profit is withdrawal from business each year without considering the loss on account of depreciation, necessary sum may not be available for buying the new asset. In such a case the required money is to be collected by introducing fresh capital or by obtaining loan or by selling some other assets. This is contrary to sound commerce policy.

Keeping Capital Intact:

Capital invested in buying an asset, gradually diminishes on account of depreciation. If loss on account of depreciation is not considered in determining profit or loss at the year end, profit will be shown more. If the excess profit is withdrawal, the working capital will gradually reduce, the business will become weak and its profit earning capacity will also fall.

For true and fair presentation and preparation of financial statements we have to account for each and every accounting head properly..as depreciation is related to fixed assets and it is charged in response of yearly wear and tear in fixed asset by its usage so it cost a company in indirect way and seems to a loss and an expense so it should be properly account for by making its account and charged yearly cost of depreciation in it according to method you chosen for its cost evaluation..

Very important that there should be an account depreciation based on the service life of fixed assets until there is no profit or loss and appear fake or exaggerated

Depreciation of fixed assets are utilized in several things1 - annual budgets2 - the cost of producing units where the depreciation cost component