The balance on the provision for depreciation account is?
Answer Details
The balance on the provision for depreciation account is deducted from the fixed assets on the balance sheet.
Provision for depreciation is a reserve that is set aside to represent the decrease in the value of fixed assets over time due to wear and tear or obsolescence. The provision for depreciation account is used to record the annual depreciation charged to the fixed assets.
The balance on the provision for depreciation account represents the total amount of depreciation charged to the fixed assets since the fixed assets were acquired. This balance is used to adjust the value of the fixed assets on the balance sheet to their net book value.
Net book value is the value of the fixed assets after deducting the accumulated depreciation from the original cost of the fixed assets. It is the amount at which the fixed assets are shown on the balance sheet.
Therefore, the balance on the provision for depreciation account is deducted from the fixed assets on the balance sheet to arrive at the net book value of the fixed assets. This helps to provide a more accurate picture of the value of the fixed assets that the organization currently owns.
In summary, the balance on the provision for depreciation account is deducted from the fixed assets on the balance sheet to arrive at the net book value of the fixed assets.