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Is depreciation expense is nominal account?
Yes depreciation is a nominal account and used to allocated the portion of fixed cost to income statement as an expense for that specific period.
What is depreciation cost?
Depreciation is that amount or part of full cost of fixed asset which is allocated to specific fiscal year during which any asset is used to generate revenue.
Why depreciation is nasassary?
Depreciation is necessary because in this way the cost of asset is allocated to all those fiscal years in which that asset is used to generate revenue and if depreciation is not charged for all those years then it is against the matching concept as asset is used to generate revenue for more than one fiscal year but cost is allocated to one specific year.
Explained the concept of depreciation and amortization?
Depreciation is the wear and tear charge allocated to specific fiscal year thorugh income statement for related fixed tangible assets while amortization is same as depreciation just it is done for intangible fixed assets.
How would you define depreciation?
For anything other than land, which is not allocated, the reclassification of tangible assets is called depreciation (for anything other than natural resources) or depletion (for natural resources) expense.
What is accumulated depreciation on a statement of cash flow?
Accumulated depreciation is the amount of a long-term's asset's cost that has been allocated to depreciation since the time the asset was acquired.
Is depreciation expense is nominal account?
Yes depreciation is a nominal account and used to allocated the portion of fixed cost to income statement as an expense for that specific period.
What is depreciation cost?
Depreciation is that amount or part of full cost of fixed asset which is allocated to specific fiscal year during which any asset is used to generate revenue.
Why depreciation is nasassary?
Depreciation is necessary because in this way the cost of asset is allocated to all those fiscal years in which that asset is used to generate revenue and if depreciation is not charged for all those years then it is against the matching concept as asset is used to generate revenue for more than one fiscal year but cost is allocated to one specific year.
Explained the concept of depreciation and amortization?
Depreciation is the wear and tear charge allocated to specific fiscal year thorugh income statement for related fixed tangible assets while amortization is same as depreciation just it is done for intangible fixed assets.
How would you define depreciation?
For anything other than land, which is not allocated, the reclassification of tangible assets is called depreciation (for anything other than natural resources) or depletion (for natural resources) expense.
Is depreciation expense under administrative expense?
Depreciation expense can be allocated to Administrative Expense or Selling & Marketing Expense or even to Cost Of Goods Sold. The amount of allocation and how that is done is specific to the type of business or industry.
How does depreciation expense on the income statement relate to accumulated depreciation on the balance sheet?
Depreciation expense on the income statement represents the portion of the asset's cost that is allocated as an expense during the reporting period. Accumulated depreciation on the balance sheet is a contra-asset account that reduces the asset's original cost by the total amount of depreciation expense recognized over its useful life. Thus, depreciation expense increases the accumulated depreciation balance on the balance sheet.
Sinking fund method for depreciation?
Sinking fund method for depreciation The straight line method has equal annual depreciation for every year. There are other methods which has more depreciation allocated to the earlier years like Written-Down Value (WDV) method in which depreciation is charged at fixed rate (%) on the reducing balance (i.e. cost less depreciation) every year. The sinking fund method allocates more depreciation to the later years. The depreciation for the first year equals the annual deposit needed for a sinking fund to accumulate at the given rate to an amount that equals the depreciation base. For each consecutive year, the annual depreciation equals the annual sinking fund deposit plus the interest earned on the fund up to that year.
What is the normal balance of depreciation expense accounts?
The answer to this question depends on the value of the depreciable assets the company has, the useful lives of the assets, and the depreciation methods used. When a firm owns many depreciable assets, depreciation expense will be higher. The longer the useful lives of the assets, the less the depreciation expense will be per period because the expense is being allocated over a longer period of time. The depreciation method also has a huge impact. If the straight-line method is used, then the expense will be constant each period. If another method such as double-declining balance is used, higher depreciation will occur during the beginning of the life of the asset. All of these factors affect the balance of the depreciation expense account.
What is the different sum-of-the-year digits method versus the straight line method?
The sum-of-the-year digits method is an accelerated depreciation method that allocates a larger portion of the asset's cost to the early years of its useful life, while the straight-line method evenly distributes the depreciation expense over the asset's useful life. As a result, the sum-of-the-year digits method results in higher depreciation expense in the earlier years and lower depreciation expense in the later years compared to the straight-line method.
Is depreciation a direct or indirect cost?
Depreciation can be either a direct cost or an indirect cost, or it can be both direct and indirect.Let's illustrate this with the depreciation of a machine used in Department 23 of a manufacturer. The depreciation on that machine is a direct cost for Department 23. It is direct because it is traceable to Department 23 without any allocation.The depreciation of this same machine will be an indirect cost of the products manufactured with that machine. It is indirect because the depreciation is allocated to the products. Perhaps the machine in Department 23 has depreciation of $50,000 per year (cost of machine of $500,000 divided by 10 years of useful life). The $50,000 of annual depreciation is then assigned or allocated to products based on the number of hours that products use the machine. For example, if the manufacture expects 20,000 machine hours of use in the current year, then it assigns or allocates $2.50 ($50,000/20,000) per machine hour to each product using the machine. If Product #189 requires one hour of this machine's time, Product #189 will have $2.50 as part of its indirect costs. Indirect manufacturing costs are also referred to as manufacturing overhead, factory overhead, or burden.
