Accounting Reports Question:
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Tell me why we cannot depreciate stock?
Answer:
Depreciation is charged only on fixed assets because we are allocating the total expense of Fixed asset for many years.
Stock is a current asset generally used to sell with in a year only.
More importantly we show consumption of stock in Trading A/c through Cost of goods sold.
(i.e.,Opening stock + Purchase - Closing Stock)
That means Stock consumption expenses is already booked in Trading A/c hence we do not show again as expense by treating as deprecation.
Stock is a current asset generally used to sell with in a year only.
More importantly we show consumption of stock in Trading A/c through Cost of goods sold.
(i.e.,Opening stock + Purchase - Closing Stock)
That means Stock consumption expenses is already booked in Trading A/c hence we do not show again as expense by treating as deprecation.
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