Thank you sir, for explaining financial statements in detail. I had a question in mind: The fixed asset like the car or office would have been mentioned as an expense when it was purchased. So again by making the depreciation, we would be making twice the expense incurred in the P&L statement. Kindly share your knowledge to solve my query.
Purchases change asset composition. For example: Car for cash, produces no effect on liabilities, value you had in the form of car is now there in the form of a car. By including the decline in value due to usual wear and tear i.e. depreciation in P/L we register it in Balance Sheet by deducting 'Net Loss' from the capital.
In accounting buying a fixed asset does not automatically lead to a profit and loss account cost. They are directly posted to the balance sheet under the asset column. So, the historical cost of the asset is recorded by its yearly depreciation * number of years it will function.
This is brilliant sir !
Thank you sir, for explaining financial statements in detail.
I had a question in mind: The fixed asset like the car or office would have been mentioned as an expense when it was purchased. So again by making the depreciation, we would be making twice the expense incurred in the P&L statement.
Kindly share your knowledge to solve my query.
Purchases change asset composition. For example: Car for cash, produces no effect on liabilities, value you had in the form of car is now there in the form of a car. By including the decline in value due to usual wear and tear i.e. depreciation in P/L we register it in Balance Sheet by deducting 'Net Loss' from the capital.
In accounting buying a fixed asset does not automatically lead to a profit and loss account cost. They are directly posted to the balance sheet under the asset column. So, the historical cost of the asset is recorded by its yearly depreciation * number of years it will function.
TY VERY MUCH SIR
thank u sir
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