“Provision for depreciation is made to provide funds for replacement of a fixed assest” discuss this statement (6 marks)

Depreciation is not a movement of cash so therefore does not provide funds for a replacement of a fixed assest. Depreciation is a book keeping entry, debiting the income statement (P+L) and crediting provision for depreciation. 

However, depreciation is an application of the accural/matching conept, it is matched with the benefit a fixed assest provides over a certain period. Depreciation spreads the cost over the useful life of the assest by charging it as an expense.