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Depreciation and its accounting
What is depreciation in accounting terms?
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful economic life, reflecting the consumption of the asset's value.
What is the primary purpose of providing depreciation in accounting?
To allocate cost of asset over its useful life systematically.
Which accounting principle makes depreciation necessary?
The matching principle requires that the cost of an asset be matched against the revenue it helps generate, spreading the expense over the asset's useful life.
Which Indian Accounting Standard specifically deals with depreciation of tangible assets?
Ind AS 16 deals with Property, Plant and Equipment depreciation.
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