Is is necessary to provide depreciation on a fixed asset of which the market value is higher than its book value. Why?
Dear student
Depreciation is decline in the value or fixed assets due to their constant use or obsolesce due to expiry of time.The gradual reduction or decline in the value of asset lead to a point when the assets will have no value .It needs to be replaced by another asset of a similar type. At such time it become necessary to produce another asset and to pay for the same. Therefore it is necesary to provide depreciation even if the market value is higher than the book value.
Regards
Depreciation is decline in the value or fixed assets due to their constant use or obsolesce due to expiry of time.The gradual reduction or decline in the value of asset lead to a point when the assets will have no value .It needs to be replaced by another asset of a similar type. At such time it become necessary to produce another asset and to pay for the same. Therefore it is necesary to provide depreciation even if the market value is higher than the book value.
Regards