Explain the justification for following each method of depreciation: - staight line method - double declining balance - sum of the years digits - units of production
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Explain the justification for following each method of
- staight line method
- double declining balance
- sum of the years digits
- units of production
An expense incurred as a result of machinery or other asset usage during the year refers to the depreciation expenses is called depreciation expenses.
Thus, it is the allocation of an asset’s cost to the expense during the accounting period in which the asset has been used.
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