CA Foundation Exam > CA Foundation Videos > Principles and Practice of Accounting > Depreciation Accounting
Depreciation Accounting Video Lecture | Principles and Practice of Accounting - CA Foundation
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FAQs on Depreciation Accounting Video Lecture - Principles and Practice of Accounting - CA Foundation
| 1. What is depreciation accounting? |  |
Ans. Depreciation accounting is a method used to allocate the cost of a tangible asset over its useful life. It helps in recognizing the reduction in the value of an asset due to wear and tear, obsolescence, or any other factors that decrease its value over time.
| 2. How is depreciation calculated? | |
Ans. Depreciation can be calculated using various methods such as straight-line method, declining balance method, and units of production method. The most common method is the straight-line method, where depreciation expense is calculated by dividing the cost of the asset by its useful life.
| 3. Why is depreciation accounting important? | |
Ans. Depreciation accounting is important because it allows businesses to accurately measure the wear and tear of their assets over time. It helps in determining the true profit or loss of a business by allocating the cost of the asset over its useful life. Additionally, it provides insights into the value of assets and helps in making informed decisions regarding repairs, maintenance, and replacement.
| 4. What is the impact of depreciation on financial statements? | |
Ans. Depreciation has a significant impact on the financial statements of a business. It reduces the value of the asset on the balance sheet, which in turn affects the net income and retained earnings on the income statement. Additionally, it also affects the cash flow statement by reducing the cash flow from operations due to the depreciation expense.
| 5. Can depreciation be reversed or adjusted in the future? | |
Ans. No, depreciation cannot be reversed or adjusted in the future. Once the depreciation expense is recorded, it becomes a permanent reduction in the value of the asset. However, if there are any changes in the estimated useful life or salvage value of the asset, the depreciation method can be adjusted going forward.
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Nov 21, 2024 Last updated |
Video Description: Depreciation Accounting for CA Foundation 2024 is part of Principles and Practice of Accounting preparation.
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