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Yes, depreciation is considered a sunk cost in financial analysis. Sunk costs are costs that have already been incurred and cannot be recovered, so they are not relevant for future decision-making. Depreciation is a non-cash expense that reflects the decrease in value of an asset over time, and it is treated as a sunk cost in financial analysis.

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5mo ago

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Related Questions

Is depreciation a controllable cost?

No. Depreciation would be considered an uncontrollable cost because it is fixed


How do you account for depreciation in your financial statements?

Depreciation is the process of allocating the cost of a tangible asset over its useful life. In financial statements, depreciation is recorded as an expense, reducing the asset's value on the balance sheet. This helps reflect the true value of the asset as it is used over time.


How to account for depreciation in financial statements?

Depreciation is accounted for in financial statements by allocating the cost of an asset over its useful life. This is done to reflect the decrease in value of the asset over time. The most common method used is straight-line depreciation, where the cost of the asset is divided by its useful life to determine the annual depreciation expense. This expense is then recorded on the income statement and the accumulated depreciation is shown on the balance sheet to reduce the asset's carrying value.


What is the source document of depreciation?

The source document of depreciation is typically the asset's acquisition invoice or purchase order, which provides details about the asset's cost, useful life, and method of depreciation. This document serves as the basis for calculating depreciation expenses over time, ensuring that the asset's value is systematically allocated in financial statements. Additionally, any relevant supporting documentation, such as maintenance records or appraisals, may also be considered in the depreciation process.


Is depreciation beneficial if income is non taxable If not is it appropriate to remove it from the financial statements?

Depreciation doesnot have any effect when income is non taxable but even then depreciation is shown to reduce the cost of asset and allocate it to income statement of fiscal year.


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