Assume G-1 Designing Consultants purchased a building for $400,000 and depreciated it on a straight-line basis over
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Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Year 20 Depreciation Expense 400000 55000 ...View the full answer
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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