0
Why the depreciation charged only on fixed assets not on current assets?
Wiki User
∙ 10y ago
because a) fixed assets are having longer liquidity time period in term of realisation in cash or cash equivalent like land & building will take longer time to relaized in cash but current assets like Accounts receivable or inventories have short time period for realisation i.e. 90 days ans so on. b) fixed assets are held in organisation to produce econimic benefit rather than it exist because of an economic process. For example , plant and machineary is used in companies for production where as finished good in stock are result of that production process. c) fixed assets are biggest expenditure for corporation and have a defenite life period for commercial purpose and after that time period they become obsolate for use and then business have to buy them again which will be a big financial issue for any business, to prevent business for this financial hardship , accounting bodies accross the globe used depreciation as a tool to create a sinking fund to replace that asset in future.
Wiki User
∙ 15y ago
Wiki User
∙ 10y agofixed assets are those assets the benefit of which is taken by company in more than once fiscal year that's why through using depreciation only certain portion of fixed asset is recorded in income statement for one fiscal year.
Current assets are always assumed to be used in a single fiscal year that's why they are completely recorded in income statement that's why no need to depreciate them.
Add your answer:
Earn +20 pts
Is depreciation charged on current assets or not when tax payer is individual?
Depreciation is always charged on fixed assets and it does not has any relation with individual or company status.
Can depreciation be for fixed asset only?
Depreciation is the method of allocating the amount of fixed asset to the fiscal year in which that asset utilized and it is only applicable to fixed assets because current assets are fully utilizable in current year that's why full amount of current assets are charged to income statement.
Depreciation on Fixed Asset is a operating expenses or not?
Depreciation on Fixed Asset (Furniture, Building) are considered as Non-Current Assets
Why fixed assets depreciate?
Fixed assets depreciate because through depreciation process cost of fixed asset charged to all those fiscal years in which that fixed asset is used.
Fixed asset depreciation schedule?
Fixed asset depreciation schedule shows the calculation of yearly depreciation expense which is scheduled to be charged to income statement for all fixed assets and the total amount of depreciation applicable to specific income statement of business.
Sum of the year depreciation?
In sum of year digit depreciation method depreciation is charged based on total number of years fixed assets is usable in business instead of using any percentage or fixed amount of depreciation.
When depreciating fixed assetthe land is not depreciated?
Depreciation is always charged on the depreciable assets only.... books and teachers are teaching wrong actually.. that.. depreciation is charged on fixed assets.... but it is not true....Depreciation is always charged on fixed tangible assets which are depreciable...Assets which decrease their value because of their use, accident etc..for example, plant, machinery, motor vehicles etc...Clear all your accountancy doubts... use... "ULTIMATE BOOK OF ACCOUNTANCY"published by vishvas publications
If Fixed assets are properly maintained, depreciation is unnecessary. Do you agree?
If fixed assets are properly maintained, depreciation is unnecessary do you agree.?
Fixed assets reduces profits in balance sheet?
depreciation of fixed assets reduces the profit as depreciation is also an expense.
Depreciation is provided on?
on Fixed Assets
What is depreciation of fixed assets?
Depreciation is the method of allocation of part of cost to all fiscal years to which fixed asset is used for revenue generation to income statement
Why current assets are not depreciated?
current assets are not depreciated because depreciation process is use to allocate long term asset cost to specific fiscal year in which it used if fixed assets also fully used in one fiscal year then there is no need of depreciation as well.
