Depreciation: (Just know these words)
Straight Line Depreciation Accelerated Depreciation.
Straight line depreciation method charges cost evenly throughout the useful life of a fixed asset.
This depreciation method is appropriate where economic benefits from an asset are expected to be realized evenly over its useful life.
Straight line method is also convenient to use where no reliable estimate can be made regarding the pattern of economic benefits expected to be derived over an asset's useful life.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets.
The two most popular methods of accelerated depreciation are the double declining balance method and the sum-of-the-years’ digits method.
Straight Line Depreciation Accelerated Depreciation.
Straight line depreciation method charges cost evenly throughout the useful life of a fixed asset.
This depreciation method is appropriate where economic benefits from an asset are expected to be realized evenly over its useful life.
Straight line method is also convenient to use where no reliable estimate can be made regarding the pattern of economic benefits expected to be derived over an asset's useful life.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets.
The two most popular methods of accelerated depreciation are the double declining balance method and the sum-of-the-years’ digits method.
