Depreciation Quiz

Depreciation Fundamentals

• Depreciation is a non-cash expense that represents the allocation of the cost of a tangible asset over its useful life.

Depreciation Methods

• The reducing balance method of depreciation assumes that the asset provides more economic benefits in the early years of its useful life.
• The straight-line method of depreciation is characterized by allocating the cost of the asset evenly over its useful life.

Impact on Financial Statements

• Depreciation affects the financial statements by reducing the net income reported on the income statement and the carrying value of the asset on the balance sheet.
• Depreciation expense is reported on the income statement, and the accumulated depreciation is reported on the balance sheet.

Journal Entries

• The purpose of journal entries relating to depreciation is to record the expense and reduce the carrying value of the asset.

Depreciation Method Choice

• The choice of depreciation method affects the financial statements by influencing the amount of depreciation expense reported each period, which in turn affects net income and the carrying value of the asset on the balance sheet.

Test your knowledge of depreciation with this quiz on journal entries and methods of depreciation. Learn about the impact of depreciation on financial statements and enhance your understanding of this important accounting concept.