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You need to see the bigger picture first i.e. why do we do accounting? The reason is to know the true and fair financial condition and progress of the business. So, how does depreciation helps us to see the true and fair view of the business? Depreciation is charged on fixed assets. Fixed assets last for years and usually accounts are prepared periodically usually a yearly. Fixed assets loose value with time and usage and a ton other things. So that loss of value need to be accounted for in order to see the true and view of the business. And depreciation is not a charge actually its a notional (presumed) charge because depreciation does not cause any outflow of cash. Its a process of allocating the investment made on the purchase of a fixed asset.
I hope this answers your question.
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Accumulated depreciation and depreciation expense?
Using accumulated depreciation and depreciation expense is a way that businesses can realize the true value of assets. A piece of equipment, for example, is devalued every year by the process of amortizing the asset. This in turn is recorded as depreciation and depreciation expense.
What are the basic method of depreciation?
http://en.wikipedia.org/wiki/Depreciation#Straight-line_depreciation
What is the normal balance of accumulated depreciation?
the normal balance of accumulated depreciation is "credit"
EBITDA is 7.5 million and net income is 1.8 million interest expense 2 million and corporate tax 40 what is the charge for depreciation and amortization?
D&A = 2.5 million
Is depreciation expense an asset or liability?
Depreciation expense is neither an asset or liability. It is an expense.
Which fixed asset their no charge depreciation?
Land is the only fixed asset which has no depreciation charge because land does not depreciate it's value.
Distinguish between depreciation policy and the concept of depreciation?
Depreciation policy is management thing that what depreciation method to use and how much depreciation to charge to each asset. Depreciation concepts are concepts which govern the depreciation process which management cannot change they are universal rules to follow depreciation that how straight line depreciation work etc.
Which is the only assets which doesn't charge depreciation?
Land is not subject to depreciation because value of land doesnot depreciate rather appreciate and nobody knows the exact disposal time of land.
Does depreciation is charged on intangible assets?
Depreciation is charged to tangible assets while amortization is used to charge intangible assets.
Why is depreciation always positive on a cash flow statement?
depreciation is a source of cash. because we charge depreciation in profit and loss but we added back in cash flow. remember one thing that capital expenditure= amount of depreciation
The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is?
straight-line
Is depreciation of sales office equipment a selling expense?
The Sales Office is in charge of the selling of valuables of an entity. Thus, all expenses related to this office is debited to selling expenses. Furthermore, depreciation is a form of expense, and deserves a different account, but since it is related to the sales office, it is debited to selling expenses. Yes, it is a selling expense.
What is depreciation and what difference between accumulated depreciation and depreciation expanes and where these adjustd in accounting system?
When a company buys an asset they have to spread the cost of the asset over it's useful economic lifetime, this is done with depreciation. The accumulated depreciation is the depreciation from previous years and the charge for the year is the amount being depricated that year, which will be charged to the profit and loss. The assets will shows as a debit balance while depreciation will show as a credit balance in the balance sheet. When charge the depreciation for the year you would credit the balance sheet and debit the profit and loss. So after the asset has come to the end of it's useful economic lifetime the value in the balance sheet will become zero or close to it as the credits of depreciation will cancel out the debit if the asset value.
Why depreciation is not charged on land?
In order to charge depreciation, we must know the expected life of the Asset. So in the case of Land, we cannot calculate the expected life of the land.
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.
Can you charge depreciation at building according to international accounting standard?
Yes, you can. It also depends on company's policy.
How are accumulated depreciation and depreciation expenses similar?
Accumulated depreciation is all of the depreciation ever 'accumulated' against the assets currently in service. It is shown on the balance sheet as a 'contra' (negative) asset, directly below the assets it relates to. Depreciation expense is the current period's depreciation of the assets currently in service. It is shown on the income (P&L) statement as an expense. Example: Business purchased a truck for $20,000 which will last 5 years. For simplicity, we'll use 'straight-line' depreciation. End of Year One: Depreciation expense on Income Statement $4,000 (1/5th of $20,000) Accumulated Depreciation on balance sheet: $4,000 End of Year Two: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $8,000 (both years) End of Year Three: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $12,000 (all three years)
