The depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Which statement is incorrect regarding depreciation methods? a. Straight-line depreciation results in a constant charge over the useful life if the asset’s residual value does not change. b. The diminishing balance method results in a decreasing charge over the useful life c. The units of production method results in a charge based on the expected use or output d. A depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is appropriate.
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.
The
expected to be consumed by the entity. Which statement is incorrect regarding depreciation methods?
a. Straight-line depreciation results in a constant charge over the useful life if the asset’s residual value does not
change.
b. The diminishing balance method results in a decreasing charge over the useful life
c. The
d. A depreciation method that is based on revenue that is generated by an activity that includes the use of an
asset is appropriate.
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