Question

What are the effects of depreciation on profit and loss account and balance sheet?

Answer 1

Depreciation is charged as expenditure in the Profit and Loss account and the depreciation figure is deducted from the value of concerned assets on the assets side of the balance sheet.

In that case, on one hand, it reduces the profit of the concern; on the other hand, it reduces the assets side in the balance sheet. Here, it is worth mentioning that Depreciation is a non-cash expenditure.