IN MANUFACTURING ACCOUNT, DEPRECIATION OF OFFICE MACHINE IS CHARGED TO
- A. trading account
- B. appropriation account
- C. balance street
- D. profit and loss account ✓
The answer to the question is: D. profit and loss account
Depreciation is the allocation of the cost of a tangible asset over its useful life. In the context of manufacturing accounts, depreciation of office machines is considered an operating expense and is therefore charged to the profit and loss account. This treatment reflects the reduction in the value of the office machines as they are used in the production process.
Depreciation is an important concept in accounting as it allows businesses to spread the cost of their assets over time, matching the expense with the revenue generated from using those assets. In manufacturing accounts, which are used by manufacturing companies to calculate the cost of goods produced, including depreciation as an operating expense ensures that the true cost of production is reflected in the financial statements.
The profit and loss account, also known as the income statement, summarizes a company’s revenues and expenses during a specific period, such as a fiscal quarter or year. By charging depreciation of office machines to the profit and loss account, manufacturing companies accurately reflect the impact of asset usage on their profitability.