Differentiating Depreciation Methods

Differentiating Depreciation Methods Henry, Lwanga ACC/230 01/26/2012 Renata, Milton The process of wear and tear is a system of allocation the hail of long-lived pluss. The original cost less(prenominal) any estimated residual value at the end of the meats vivification is spread over the expected biography story of the addition. Although the total amount of depreciation over the additions life is the same regardless of the mode utilized, the rate of depreciation varies. There are three common rules of depreciations used in the accounting industry individually with a unlike reason; straight line depreciation regularity, the quicken depreciation method and the units-of-production depreciation method. The straight-line method spreads the expense evenly by fulfilments and the deepen methods yield higher depreciation expense in the out front of time days of an assets useful life and spurn depreciation expense in the later years piece the units-of-producti on method, bases depreciation expense for a given period on actual use. Companies use different depreciation methods for levy report and financial describe because every participation has a different asset quality and the depreciation on those assets for each company depreciates differently so it is up to the management to be clear-cut to which choice of depreciation to use in their reporting in respect to their fixed assets.

Straight Line method: favor: 1) Straight-line method allows for much income smoothing. 2) It allows company to show to a greater extent hold value of the asset which increases the value of the company. Disadvantages: 1) benefit of impose ta! x write-off is availed late. 2) In practical, annual benefit from the assets use decreases with age Accelerated method: avail: 1) This method allows more tax deduction in earliest years 2) As asset depreciates faster, future expenses in the keep of the asset also decreases. 3) This method provides significant benefits in first years. This is beneficial as asset may become ancient or...If you want to get a full essay, order it on our website: BestEssayCheap.com

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