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Is depriciation a fixed cost?
Yes depreciation is a fixed cost of business which is an allocation of fixed asset cost over period of asset life.
How would you determine whether an asset is current asset or noncurrent asset?
I am taking a course in Accounting, and I was taught that an asset is current if it will be used up within one year. Long-term assets are those that last over 12 months.
What does asset mean what does asset mean?
asset is anything that appreciate in value over a period of time
Depreciation is a process of cost allocation and not valuation What does this mean?
Depreciation spreads the cost of a fixed asset over the useful life of that asset so a portion of that cost is recognized as an expense in each period that the asset is in service. The original cost, less the accumulated depreciation is the net book value of the asset. The net book value may not represent the actual market value of the asset. Depreciation is not concerned with the market value but rather the value of the contribution that the asset makes to the business.
Is depreciation expense used to allocate historical cost over the life of an asset?
Yes, depreciation account is used to allocate the cost of asset over the life of asset to income statement of the fiscal year where asset utilized to earn revenue.
Is depriciation a fixed cost?
Yes depreciation is a fixed cost of business which is an allocation of fixed asset cost over period of asset life.
How would you determine whether an asset is current asset or noncurrent asset?
I am taking a course in Accounting, and I was taught that an asset is current if it will be used up within one year. Long-term assets are those that last over 12 months.
What does asset mean what does asset mean?
asset is anything that appreciate in value over a period of time
What does the term book value mean?
Book value refers to the value of an asset as reported on a company's balance sheet, calculated by subtracting the asset's accumulated depreciation from its original cost. It indicates the original cost of the asset minus any accumulated depreciation, providing a rough estimate of the asset's current worth on the company's financial statements.
Depreciation is a process of cost allocation and not valuation What does this mean?
Depreciation spreads the cost of a fixed asset over the useful life of that asset so a portion of that cost is recognized as an expense in each period that the asset is in service. The original cost, less the accumulated depreciation is the net book value of the asset. The net book value may not represent the actual market value of the asset. Depreciation is not concerned with the market value but rather the value of the contribution that the asset makes to the business.
What is over capitalisation?
Overcapitalization occurs when a company has raised more capital than needed for its operations, leading to inefficient allocation of resources and reduced profitability. This can result in lower return on investment for shareholders and increased financial risk for the company.
Is depreciation expense used to allocate historical cost over the life of an asset?
Yes, depreciation account is used to allocate the cost of asset over the life of asset to income statement of the fiscal year where asset utilized to earn revenue.
Process of spreading the cost over an asset's useful life?
Expensing is the process of spreading the cost over an asset's useful life.
Is net profit an asset or liability?
In a way profit could be considered an asset but its a stretch. Profit is term used to describe the earnings left over after you subtract the expenses related to the earning of that profit. The retained earnings would actually be the asset. The term profit is just a way to tell if your business is making money (or profitable) and doesn't really fall into the asset category. You will not see profits on a balance sheet rather you will see earnings.
What is a capital purchase?
A capital purchase is a purchase of equipment, property, or any asset that contributes to the production of a good or service. Depending on your countries tax laws, it would be entered into your asset register and its value would depreciate over a number of years.
Why is depreciation unnecessary when fixed assets is properly maintained?
Depreciation is a systematic allocation of the cost of a fixed asset over its useful life. It is not tied directly to the physical condition of the asset but is an accounting method to match the cost of the asset with the revenue it generates over time. Even when fixed assets are properly maintained and remain in good physical condition, they still undergo wear and tear or obsolescence over time. Depreciation reflects the gradual decrease in the asset's value as it contributes to generating revenue for the business. Here are a few reasons why depreciation is considered necessary, even for well-maintained fixed assets: **Matching Principle:** Depreciation aligns with the matching principle in accounting, where the costs associated with generating revenue should be recognized in the same period as the revenue is earned. Allocating the cost of an asset over its useful life helps in presenting a more accurate picture of the business's financial performance. **Asset Replacement:** Even if an asset is well-maintained, it will eventually need replacement due to technological advancements or changing business needs. Depreciation allows a business to set aside funds for the eventual replacement of the asset. **Financial Reporting:** Depreciation is crucial for providing a true and fair view of a company's financial position. It helps in presenting a more accurate balance sheet by reflecting the reduction in the value of fixed assets over time. **Tax Deductions:** Depreciation is often tax-deductible, providing businesses with tax benefits over the useful life of the asset. This can significantly impact a company's cash flow and tax liability. In summary, while proper maintenance can extend the physical life of fixed assets, depreciation is still necessary for accurate financial reporting, adhering to accounting principles, planning for asset replacement, and realizing tax benefits. It's a financial concept rather than a direct reflection of an asset's condition.
Why it is that an asset is a asset?
There are three characteristics that define an asset, as follows:The entity obtained the asset in a past event/transaction.The entity has present control over the asset.Future economic benefit is expected to flow to the entity as a result of their possession of the asset.
