What is "depreciation" essentially, and should the accounting profession allow multiple methods for depreciating long-term assets?...

What is "depreciation" essentially, and should the accounting profession allow multiple methods for depreciating long-term assets? Why or why not?

Expert Solution

Depreciation - It is the systemmatic and rational allocation method used to achieve matching.It is associated with alocation of historical cost of fixed assets over its useful life so as to match cost associated with the long term asset with its economin benefit being earned, thus both are matched as per the respected period cost and benefit are aligned.

Yes there are different types of depreciation methods and all these methods are permissible as per the reporting framework issued by accounting professiona body.

The different methods can be used by the organisations depending on whether they want to allocate the assets cost on initial years, then they can opt for declining balance method, or if they want to allocate cost periodically then they can use straight line depreciation method and whenever an organistaion wants to depreciate the fixed assets on basis of actual level of usage it can go for depreciation based on usage of production activity level.

ekkarill92 answered 2 years ago

should accounting profession allow multiple methods for depreciating long term assets

Why does the accounting profession allow for multiple methods in accounting for inventory sold and on...

Why does the accounting profession allow for multiple methods in accounting for inventory sold and on hand (LIFO, FIFO, weighted average, specific identification)? Can they all be right (i.e., accurately assign cost to goods sold and unsold)?

Blocher Company is evaluating the following methods of accounting for depreciation of long-lived assets and inventory:...

Blocher Company is evaluating the following methods of accounting for depreciation of long-lived assets and inventory: Depreciation: straight-line; double-declining balance (DDB) Inventory: first in, first out (FIFO); last in, first out (LIFO) Assuming a deflationary environment (prices are falling), which of the following combinations will result in the highest net income in year 1? Group of answer choices A) DDB; FIFO. B) Straight-line; LIFO. C) Straight-line; FIFO.

Depreciation by Two Methods; Sale of Long-term or relatively permanent tangible assets such as equipment, machinery,...

Depreciation by Two Methods; Sale of Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.Fixed Asset New tire retreading equipment, acquired at a cost of $718,750 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated The estimated value of a fixed asset at the end of its useful life.residual value of $61,800....

In accounting we "capitalize" long-lived assets by putting them on the balance sheet and then depreciating...

In accounting we "capitalize" long-lived assets by putting them on the balance sheet and then depreciating those assets over time, based on some concept that each year the asset represents less value to the business and that each year a certain amount of the value of the asset is used up in the business processes. For accountants, it would be much easier just to expense long-lived assets at the time of purchase. Even though it requires more work, what are...

‘What are the primary accounting issues involved in the establishment of a long-term asset, the depreciation...

‘What are the primary accounting issues involved in the establishment of a long-term asset, the depreciation of a long-term asset, and the sale of a long-term asset?

What are the primary accounting issues involved in the establishment of a long-term asset, the depreciation...

What are the primary accounting issues involved in the establishment of a long-term asset, the depreciation of a long-term asset, and the sale of a long-term asset?.

Using Excel create depreciation schedule for the Straight-Line and Double-Declining-Methods for the following Long-Term assets: Asset...

Using Excel create depreciation schedule for the Straight-Line and Double-Declining-Methods for the following Long-Term assets: Asset 1 – Office Furniture Acquisition cost $30,000 Residual value $5,000 Useful life 7 years-------- Asset 2 – Delivery Truck Acquisition cost $40,000 Residual value $5,000 Useful life 5 years------- Asset 3 – Computer Acquisition cost $2000 Residual value $0 Useful life 4 years For each asset create its own Tab (Sheet) in the Excel worksheet and name the corresponding sheet by the asset. At...

Acquisition and depreciation of long-term assets are important to understand because these assets represent a business's...

Acquisition and depreciation of long-term assets are important to understand because these assets represent a business's largest investment of resources. Recording the correct cost for an asset can be difficult because there are many costs associated with the purchase or construction of tangible property, and there are many legal fees associated with the purchase of real property. After assets have been acquired or constructed, they can be depreciated over a period of time. Depreciation is not meant to show the...

What are the two basic methods of accounting for long-term construction contracts? Indicate the circumstances that...

What are the two basic methods of accounting for long-term construction contracts? Indicate the circumstances that determine when one or the other of these methods should be used.

Question