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| 1. |
If Depreciation reduces profit, reduces Book value of assets and also reduces capital of the proprietor, then why do enterprises provide Depreciation ? |
| Answer» Solution :DEPRECIATION, is allocation of cost of fixed assets in a systematic manner over their estimated useful life. It is thus, a cost. Financial Statements must be show true and fair view of the financial PERFORMANCE and position of the business. If depreciation is not PROVIDED, both fixed asset and profit will be shown at higher amounts. | |