Identify which depreciation method, straight-line or diminishing-balance, would result in the greatest reduction in the carrying amount
Question:
Identify which depreciation method, straight-line or diminishing-balance, would result in the greatest reduction in the carrying amount of a piece of equipment in the year of its acquisition.
Step by Step Answer:
Diminishing balance would result in the greatest reduction i...View the full answer
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley
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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