What are the reasons of charging depriciation?

Answer 1

Depreciation is charged to allocate the cost of an asset over its useful life, reflecting the wear and tear or obsolescence of the asset. It helps businesses match expenses with revenues, adhering to the matching principle in accounting. Additionally, charging depreciation provides a more accurate representation of a company's financial position and performance, as it ensures that asset values are not overstated on the balance sheet. Lastly, it can also have tax implications, as depreciation can be deducted as an expense, reducing taxable income.