Question

Depreciation is treated as a business expense and is debited to ________.

• A. Trading account
• B. Profit and loss account
• C. Both of the above
• D. None of the Above

Answer 1

Answer: (B)

Profit and loss account

Depreciation is the decline in the value of assets on account of wear and tear and passage of time. It is treated as a business expense and is debited to profit and loss account. This, in effect, amounts to writing-off a portion of the cost of an asset which has been used in the business for the purpose of earning profits. The entry for providing depreciation is:

Depreciation A/c Dr.

To Concerned Asset A/c

In the balance sheet, the asset will be shown at cost minus the amount of depreciation.