5 Questions
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
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
How does depreciation affect the balance sheet of a business?
It decreases the value of the assets
How does depreciation impact the net income reported by a business?
It reduces the net income by recognizing depreciation expense over time
What is depreciation expense equal to in a given period?
The reduction in value placed on the asset over its useful life span
Test your knowledge of the concept of depreciation in accountancy, including its two aspects: reduction in fair value of assets and allocation of original cost to periods of use. Explore methods used for reallocating asset value and their impact on financial statements.
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