Depreciation on current assets
Depreciation is not charged on current assets because they are not expected to last for more than one year and are not considered long-term assets. Current assets include items like inventory, accounts receivable, and prepaid expense. Which can expect to use up or sell within a short period of time. As a result, they could record on the balance sheet at their original cost and are not subject to depreciation.
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Depreciation typically charges on fixed assets, such as property, plant, and equipment, which expect to last for several years and have a significant value. By allocating the cost of the fixed asset over its useful life, depreciation reflects the gradual wear and tear of the asset . It helps to match Allocate the cost of the asset over its useful life based on the revenue it generates over time.
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