Why do companies use accelerated depreciation for income tax purposes, when the total depreciation taken over the
Question:
Why do companies use accelerated depreciation for income tax purposes, when the total depreciation taken over the asset's useful life is identical to straight-line depreciation?
Step by Step Answer:
The primary benefit of accelerated depreciation for tax reporting is that the higher depreci...View the full answer
Financial Accounting
ISBN: 9781618533111
6th Edition
Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman
Related Video
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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