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Hello Sir I am new here and I need your help.
Allowance for depreciation is deducted from the cost of the machine to get the book value? Is that correct?
What does ‘allowance’ mean by in accounting?
It is called ‘accumulated depreciation’ and ‘accumulated’ means ‘total’.
This is all explained in my free lectures on this. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thanks 🙂
Please also say what does allowance mean in accounting because the allowance is made against depreciation expense and bad debt expense…
There is no allowance in respect of depreciation. It is used in the contact of doubtful debts (but is certainly not made against irrecoverable debts expense (they have not been called bad debts for many years).
The allowance for doubtful debts is simply a deduction from receivables for those that are doubtful so that only those debts that we feel are certain to be received are shown in the Statement of Financial Position.
The word allowance on its own has no real relevance.
Again, you need to watch the free lectures.
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