Accounting for IGCSE & O level - Accounting Procedures (Section 14 - No. 38)
What is the primary effect of depreciation on a business?
Increases the value of non-current assets on its balance sheet.
Increases the owner's equity.
Reduces profit and increases the cost of goods sold.
Reduces profit and increases the cost of the assets.
Explanation
Depreciation recognizes the reduction in the value of an asset, which results in reduced profit.
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