Depreciation, Provisions and Reserves
Chapter 7: Depreciation, Provisions and Reserves · ACCOUNTANCY · EN medium
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before arriving at net profit according to ‘Generally Accepted Accounting Principles’. Depreciation is a deductible cost for tax purposes. However, tax rules for the calculation of depreciation amount need not necessarily be similar to current business practices, If depreciation on assets is not provided for, then the assets will be over valued and the balance sheet will not depict the correct financial position of the business. Also, this is not permitted either by established accounting practices or by specific provisions of law. Apart from tax regulations, there are certain specific legislations that indirectly
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before arriving at net profit according to ‘Generally Accepted Accounting Principles’. Depreciation is a deductible cost for tax purposes. However, tax rules for the calculation of depreciation amount need not necessarily be similar to current business practices, If depreciation on assets is not provided for, then the assets will be over valued and the balance sheet will not depict the correct financial position of the business. Also, this is not permitted either by established accounting practices or by specific provisions of law.
Apart from tax regulations, there are certain specific legislations that indirectly
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