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Adjustment: Depreciation Video Lecture | Accountancy Class 11 - Commerce

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FAQs on Adjustment: Depreciation Video Lecture - Accountancy Class 11 - Commerce

1. What is depreciation in accounting?
Ans. Depreciation in accounting refers to the systematic allocation of the cost of a tangible asset over its useful life. It reflects the reduction in value of the asset due to wear and tear, obsolescence, or any other factors that cause a decline in its usefulness.
2. How is depreciation calculated?
Ans. Depreciation can be calculated using various methods, such as straight-line, declining balance, or units of production. The most common method is the straight-line method, which divides the cost of the asset by its useful life to determine the annual depreciation expense.
3. What is the purpose of depreciation?
Ans. The purpose of depreciation is to match the cost of an asset with the revenue it generates over its useful life. By spreading the cost over multiple accounting periods, it helps in accurately representing the asset's contribution to the company's earnings and provides a more realistic financial picture.
4. Can depreciation be reversed?
Ans. Generally, depreciation cannot be reversed once it has been recognized in the company's financial statements. However, if the asset's value increases due to a change in its estimated useful life or an improvement in its condition, the depreciation expense may be adjusted accordingly.
5. How does depreciation affect taxes?
Ans. Depreciation has a significant impact on taxes as it reduces the taxable income of a company. By deducting the depreciation expense from the revenue, the company's taxable income is lowered, resulting in a lower tax liability. This allows businesses to recover a portion of the asset's cost over its useful life and reduce their overall tax burden.
82 videos|105 docs|42 tests

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