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No, you will not get the same total depreciation amount regardless of the method used. Different depreciation methods, such as straight-line, declining balance, or units of production, allocate the asset's cost differently over its useful life. While the total depreciation expense over the asset's life will be the same, the annual expense recognized and the timing of that expense will vary based on the chosen method.
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Is depreciation on equipment fixed or variable?
Depreciation is a fixed cost because variable cost is that cost which change with the change in the production units but it doesn't put any effect on depreciation as depreciation of the equipment will remain same no matter you produce maximum number of units or produce no unit in fiscal year.
Why depreciation is not same amount each year?
why depreciation is not same amount each year?
Why the concept of consistency apply to depreciation?
The concept of consistency in depreciation ensures that a company uses the same method of depreciation for similar assets over time, allowing for comparability and reliability in financial reporting. This consistency helps stakeholders understand the company's financial performance and asset value changes better. By applying the same depreciation method consistently, companies avoid misleading fluctuations in financial statements that could arise from changing methods. Ultimately, it enhances the credibility of financial information provided to investors and regulators.
Deferred taxes arise from the use of the same method of depreciation for tax and reporting purposes. True or false?
False. Deferred taxes typically arise from differences in accounting methods or timing between tax reporting and financial reporting, such as using different depreciation methods for tax purposes than for financial statements. When the same method is used for both, there is generally no temporary difference, and therefore, no deferred tax implication.
What is depreciation reserve fund?
Accumulated depreciation which is not shown in income and expenditure account as expenditure and the same is included in the net profit and shown separately as depreciation reserved fund while adding it in the capital fund.
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.
Which type of depreciation method accelerates depreciation in the early years of an asset's life?
Diminishing value method where you depreciate the asset by a percentage rather than the straight line method where the same amount gets depreciated each year.
Why sometime depreciation charged in income statement is not same as the increase in accumulated depreciation on balance sheet?
because whin using the composite depreciation or group depreciation method and want to sale an asets we make the cash is debt by the cash received and credit the assets by original cost and the diferrince debt accomulated depreciation , then the account of accomualted deprciation in the balance sheet will not the same as depriciation expene in the income statement
Is depreciation on equipment fixed or variable?
Depreciation is a fixed cost because variable cost is that cost which change with the change in the production units but it doesn't put any effect on depreciation as depreciation of the equipment will remain same no matter you produce maximum number of units or produce no unit in fiscal year.
A method that charges the same amount of expense over each period of the asset's useful life is called?
straight line depreciation
Why depreciation is not same amount each year?
why depreciation is not same amount each year?
What is the distinction between straight line balance method and diminishing balance method?
Straight line method is the method in which asset cost is equally distributed over the entire life of asset and hence the amount of depreciation remain same for every month till salvage value. Under diminishing line method depreciation is charged on diminishing balance of asset every year for the life of asset and the amount remain at the end of life of asset is the salvage value.
Why the concept of consistency apply to depreciation?
The concept of consistency in depreciation ensures that a company uses the same method of depreciation for similar assets over time, allowing for comparability and reliability in financial reporting. This consistency helps stakeholders understand the company's financial performance and asset value changes better. By applying the same depreciation method consistently, companies avoid misleading fluctuations in financial statements that could arise from changing methods. Ultimately, it enhances the credibility of financial information provided to investors and regulators.
What is it called when scientist follow the scientist method?
following the scientist method. it is the same no matter who is doing it.
How do you xxplain different method of providing depreciation?
DEPRECIATION-A noncash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached. There are several accounting methods that are used in order to write off an asset'sdepreciation cost over the period of its useful life. Because it is a non-cash expense, depreciation lowers the company's reported earnings while increasing free cash flow.(i) Fixed Installment or Straight Line Method(ii) Fixed Percentage on Diminishing Balance Method(iii) Sum of the years Digits Method.(iv) Annuity Method.(v) Depreciation Fund Method.(vi) Insurance Policy Method.(vii) Revaluation Method.(viii) Machine Hour Rate Method.(ix) Depletion Method.(x) Repairs Provision Method.(i) Fixed Installment or Straight Line or Fixed Percentage on Original Cost. Under this method, the Depreciation is calculated on the basis of either a fixed percentage of the original value of the asset or divides the original value of asset by the number of years of its estimated life. Every year, the same amount is written off as Depreciation so as to reduce the asset account to nil.Depreciation =(Cost of the Asset + Installation Charges - Scrap Value + Removal Cost) / Estimated useful Life of the Asset(ii) Diminishing Balance Method. Under the diminishing Balance method, depreciation is calculated at a fixed percentage on the opening balance of each year. Each year the opening balance may be decreasing in value. This decreasing book value is commonly known as written down value of the asset. While applying the depreciation rate both salvage or scrap value and removal costs are ignored. There are no possibilities to reduce the book value to zero.(iii) Sum of the Years Digits Method. It gives decreasing depreciation charge year by year. For the purpose of obtaining yearly depreciation diminishing percentages to the cost of the asset, less salvage value is applied. Under this method, the rate of depreciation is a fraction having the sum of the digits representing the useful life of the asset as its denominator and individual year as its numerator.(iv) Annuity Method- Under the Annuity method, the annual depreciation charges would be ascertained with the help of Annuity table. This method gives importance to interest factor. Other methods do not take into account the interest factor while investing the assets. Fixed interest rate is charged on the opening balance of each year and then cost of asset together with interest thereon is written off equally over the life of the asset.(v) Depreciation Fund Method-Depreciation fund method provides an adequate financial requirement for the replacement of the asset when the asset is replaced by a new one. Depreciation fund account is opened and the amount of depreciation is credited to that account. The asset account stands year after year at its original cost. At the end of each year, the amount of depreciation is debited and depreciation fund account is credited and the corresponding amount is invested in securities of some reputed companies, for the purpose of mobilizing funds for replacement.(vi) Insurance Policy -Method. Under this method, an insurance policy is taken from the insurance company for the purpose of replacement of an asset. At the end of the definite period, the insurance company will pay the assured sum with the help of which asset can be repurchased.(vii) Revaluation Method.-This method is suitable for small and diverse items of asset such as bottles, corks, trade marks, loose tools, livestock etc. Under this method the amount of depreciation is ascertained to find the difference between the book value of the asset and the real value of the asset. At the end of the year the difference is taken as depreciation.(viii) Machine Hour Rate Method- The Economic Life of the asset is estimated in terms of working hours. Hourly rate is determined by dividing total cost of the asset by total number of hours to be operated in its life time. The annual depreciation charge is calculated by applying this rate to the actual number of hours operated in the particular accounting period.Machine hour rate = (Cost - Scrap Value ) / Total hours (who1e lifetime)Depreciation for the year = Machine Hour value x Estimated Hours in a year.(ix) Depletion Method-The Economic Life of the asset is determined by geographical survey methods in terms of total units of resource deposits. The depletion rate per unit is calculated by dividing the total cost of the asset by the estimated available number of units.(x) Repairs Provision Method- Under this method, first the total repair and renewal costs are determined for the whole life of the asset and then it is added to the capital cost to get a total value. Then, this value is divided by its estimated life. The resultant value is treated as Repair, Renewals and depreciation. It has to be charged to the profit and loss Account each year. The corresponding Credit is given to provision for depreciation and Repairs account.
What is the different between the cost of depreciation of a asset and its related accumulated depreciation?
Cost of depreciation assets and accumulated depreciation is same as accumulated depreciaton calculates how much depreciation is charged till date while remaining is current book value of assets.
Deferred taxes arise from the use of the same method of depreciation for tax and reporting purposes. True or false?
False. Deferred taxes typically arise from differences in accounting methods or timing between tax reporting and financial reporting, such as using different depreciation methods for tax purposes than for financial statements. When the same method is used for both, there is generally no temporary difference, and therefore, no deferred tax implication.
