Why provision for depreciation Account is credit balance

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Answer

Provision for Depreciation Account: Credit Balance Explanation

The provision for depreciation account is an important account in the financial statements of a company. It is a contra-account that is used to reduce the value of a fixed asset over its useful life. The account is maintained to record the periodic depreciation expense of a fixed asset. The account balance is always a credit balance. In this article, we will explain why the provision for depreciation account is a credit balance.

What is Provision for Depreciation?

Provision for depreciation is the amount that a company sets aside each year to reduce the value of its fixed assets over time. Depreciation is a non-cash expense that reduces the value of a fixed asset over its useful life. The provision for depreciation account is used to record this expense each year. The amount of depreciation charged to the provision for depreciation account is based on the useful life of the fixed asset and the method of depreciation used.

Why is Provision for Depreciation Account a Credit Balance?

The provision for depreciation account is a contra-account that is used to reduce the value of a fixed asset. The balance of the provision for depreciation account is always a credit balance. This is because the account is used to record the depreciation expense, which is a non-cash expense that reduces the value of the fixed asset. When the depreciation expense is recorded, it is credited to the provision for depreciation account, which increases the balance of the account.

For example, if a company purchases a machine for $10,000 with a useful life of 5 years, the company would charge $2,000 to the provision for depreciation account each year. At the end of the first year, the balance of the provision for depreciation account would be $2,000, which is a credit balance. This means that the fixed asset has been reduced in value by $2,000, and the company has recorded this reduction in the provision for depreciation account.

Conclusion

The provision for depreciation account is an important account in the financial statements of a company. It is used to record the periodic depreciation expense of a fixed asset. The account balance is always a credit balance because it is a contra-account that is used to reduce the value of a fixed asset over time. By recording the depreciation expense in the provision for depreciation account, a company can accurately reflect the true value of its fixed assets in its financial statements.

Answer

Because it is LIABILITY . ALL ASSETS AS DEBIT BALANCE AS WELL AS ALL LIABILITY AS CREDIT BALANCE

Answer

As...pfd is not charged on asset ac rather it gets accumulted over a prd of tym..onto the dep ac like..umm...dep ac gets debited due to this..which already has a debit bal thats why pfd gets credit bal..

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