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Theory Base of Accounting — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountTheory Base of Accounting3 Marks
Question
How does the matching concept apply to depreciation?
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Answer

According to matching concept, all costs which are incurred in an accounting period should be charged against the revenue of that period. Hence depreciation of current year is charged against the current year's revenue. In other words, full cost of the asset is not treated as an expense in the year of its purchase itself rather it is spread over its useful life.

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