Depreciation is a non-cash expense which should not be provided for in the profit and loss account. Comment.

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Solution

It is not correct to say that depreciation is a non-cash expense should not be allowed for in the books. If depreciation is not provided for, it will result in an overstatement of assets and profits. It is also not in agreement with the matching principle which says that expenses for a period should be matched with the revenues.

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