Prepare a December 31, 2021 balance sheet for Wildland Fire Warriors from the following: cash $40,000 accounts payable $28,000 merchandise inventory $14,000 owner’s capital $46,000 equipment $20,000
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.
Prepare a December 31, 2021
cash $40,000
accounts payable $28,000
merchandise inventory $14,000
owner’s capital $46,000
equipment $20,000
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