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Depreciation is the cost that is charged to the P&L for writing down fixed assets over their useful lives, for example if a business owns a car that they believe has a useful life of 3 years and cost £6,000. This car would then be written off, or depreciated, over 3 years at £2,000 per yea, or £167 per month, with this cost going through the P&L as an expense every month.

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15y ago

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Provision for depreciation is equal to accumulated depreciation?

yes


Is it customary for the depreciation expense account and the accumulated depreciation account to be equal?

No. Accumulated depreciation is depreciation accumulated every year and it will only increase and won't decrease. Depreciation expenses is incurred every year.


What is the formula for a straight line depreciation method?

The formula for a straight line depreciation method is the Cost minus the Salvage Value over the Life in Number of Periods which will equal Depreciation.


Cash flow can be said to equal?

It is earnings after tax (EAT) plus depreciation


How are accumulated depreciation and depreciation related?

Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.


How does an increased depreciation expense affect tax-related cash flows?

The depreciation deduction increases the amount of after tax cash (working capital) available to the business. The additional cash is equal to the amount of tax that would otherwise be payable on the depreciation claimed. This is because depreciation is an "unfunded" expense, but is really a tax deferral which is subject to recapture in the future.


How are accumulated depreciation and depreciation expensese related?

Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.


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.


How is the straight line depreciation method different from declining balance method?

Under straight line depreciation, fixed amount of depreciation is charged to every year while in declining balance method depreciation percentage remains same but depreciation is charged on remaining balance of asset due to which the amount of depreciation is different in every year.


Why accumulated depreciation exceed depreciation expense?

Depreciation expenses is for one specific fiscal year while accumulated depreciation is the sum of all depreciation expenses that’s why accumulated depreciation exceeds the depreciation if there is depreciation expense in prior year as well.


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.


What is the entry for accumulated depreciation?

Debit depreciation accountCredit accumulated depreciation