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Questions and Answers
What does depreciation refer to in accountancy?
What does depreciation refer to in accountancy?
- An actual reduction in the fair value of an asset and the allocation of the original cost of the asset to periods in which it is used (correct)
- An increase in the fair value of an asset over time
- The immediate write-off of the cost of an asset
- The appreciation of assets over their useful life span
What is the purpose of depreciating long-term assets for tax purposes?
What is the purpose of depreciating long-term assets for tax purposes?
- To reduce taxable income by allocating the cost of assets over their useful life span (correct)
- To increase taxable income by inflating the value of assets
- To defer tax payments indefinitely
- To avoid reporting asset values on tax returns
How does depreciation affect the balance sheet of a business?
How does depreciation affect the balance sheet of a business?
- It has no impact on the value of the assets
- It reduces the net income of the business
- It decreases the value of the assets (correct)
- It increases the value of the assets
How does depreciation impact the net income reported by a business?
How does depreciation impact the net income reported by a business?
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What is depreciation expense equal to in a given period?
What is depreciation expense equal to in a given period?
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