Question

What determines the life of an aircraft? 2.) What is the purpose of depreciation in reporting on assets and periodic income?

Answer 1

1.

Aircraft life depends on how much pressure it carries – like the frequency of takeoffs and landings, and its number of movements. Its wing and engine suffers that pressure, which reduces its life. The manufacturer calculates its life years based on anticipated pressures.

2.

On asset:

Depreciation is the wear and tear of a fixed asset. This is the usage of that asset, which makes a decrease of the asset value. As the time goes on such usage increases and the asset becomes closer to the end of its life. Therefore, the reporting on asset becomes necessary.

Periodic income:

Depreciation needs to be recorded on periodic income. This is so because of amortization of capital expenditure (purchasing of fixed asset) and accrual basis of accounting. Amortization is the periodic charge of an asset value, which was purchased earlier by spending huge amount of money. Accrual basis of accounting indicates the matching of expenses for revenue generation periodically.