Question

Which accounting concept requires calculation of depreciation?

Answer 1

Accounting concept 'Prudence' , 'Conservatism' putsforth that assets should not be over valued , profits should not be overstated and liabilities should not be under valued , losses should not be under Stated.....

Depreciation is charged because the fair value of assets fall over a period of time.. due to reasons like physical wear and year , technological obsolescence etc...So Depreciation is charged to ascertain and report the correct value without any overstatement in the financial Statements..That tallies with the 'Prudence' 'Conservatism' concepts