State briefly the need for providing depreciation.

Question

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Answer

The needs for providing depreciation are given below:

To ascertain the correct profit or loss: Correct profit or loss can be ascertained when all the expenses and losses incurred for earning revenues are charged to Profit and Loss Account. Assets are used for earning revenues and its cost is charged in form of depreciation from Profit and Loss Account.
To show true and fair view of financial statements: If depreciation is not charged, assets will be shown at higher value than their actual value in the balance sheet. Consequently, the balance sheet will not reflect true and fair view of financial statements.
For ascertaining the accurate cost of production: Depreciation on the assets, which are engaged in production, is included in the cost of production. If depreciation is not charged, the cost of production is underestimated, which will lead to low selling price and thus leads to low profit.
To provide funds for replacement of assets: Unlike other expenses, depreciation is non cash expense. So, the amount of depreciation debited to the profit and loss account will be retained in the business. These funds will be available for replacement of fixed assets when its useful life ends.
To meet the legal requirement: To comply with the provisions of the Companies Act and Income Tax Act, it is necessary to charge depreciation.

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Cheques amounting to ₹ 15,600 were drawn on 27th January, 2017. Out of which cheques for ₹ 11,000 were encashed up to 31-1-2017.
A wrong debit of ₹ 800 has been given by the bank in the Pass Book.
A cheque for ₹ 200 was credited in the Pass Book but was not recorded in the Cash Book.
Cheques amounting to ₹ 21,000 were deposited for collection. But out of these, cheques for ₹ 7,400 have been credited in the Pass Book on 5th February, 2017.
A cheque for ₹ 1,000 was returned dishonoured by the bank and was debited in the Pass Book only.
Interest on overdraft and bank charges amounting to ₹ 100 were not entered in the Cash Book.
A cheque of ₹ 500 debited in the Cash Book omitted to be banked.

Opened a current account with Punjab National Bank ₹ 1,00,000.
Received a cheque of ₹ 12,900 from Chandradev and allowed discount ₹ 300 to him. The cheque was deposited into Bank on the same day.
Purchased machinery for ₹ 1,00,000, payment made by cheque. Installation charge of machinery ₹ 6,000 paid in cash.
Purchased a horse for business for ₹ 20,000.
Sold goods to Gokul at a list price of ₹ 4,000. Trade discount 10% and cash discount 5%. He paid the amount on the same day and availed the cash discount.
Purchased goods for ₹ 10,000 and paid ₹ 400 for carriage on these goods.
Additional cash introduced by the proprietor ₹ 40,000.
Purchased stationery ₹ 800 and postal stamps ₹ 100.
Withdrawn from bank ₹ 20,000.
Received an order to supply goods of ₹ 40,000 from Manu and received ₹ 10,000 as an advance together with the order.
Cash ₹ 10,000 and goods worth ₹ 4,000 were stolen.
Purchased goods from Devendra for ₹ 40,000 and the payment was made by cheque.
Sold $\frac{1}{4}\text{th}$ of the above goods at a profit of 25% on cash.

2019	Particular	₹
Jan-5	Received cash from Wahi & Co. on account vide cash receipt No. 551	10,000
Jan-10	Commission received vide cash receipt No. 520*	10,000
Jan-15	Sold leather purses for cash vide Cash Memo Nos. 307-310*	6,000
Jan-24	Sold two old machines vide Cash Memo No. 1560*	3,000

Goods costing ₹ 800 purchased from Sachin on credit were omitted to be credited to his account.
Goods costing ₹ 800 purchased from Sachin on credit were credited to his account as ₹ 80.
Goods costing ₹ 800 purchased from Sachin on credit were credited to his account as ₹ 880.
Goods costing ₹ 800 purchased from Sachin on credit were posted to the debit of his account.
Goods costing ₹ 800 purchased from Sachin on credit were posted to the debit of his account as ₹ 80.