Which of the following statements is correct about Depreciation?
Correct answer: D. Depreciation is a charge against profit
- A. Depreciation cannot be provided in case of loss in a financial year
- B. Depreciation is an appropriation of profit
- C. Depreciation is provided in the books only when there is profit
- D. Depreciation is a charge against profit
Explanation
Depreciation is a charge against profit because it is an expense incurred in using the asset, even when the business reports a loss. It is not an appropriation of profit and is not restricted to profitable years.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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