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 live of long-lived pluss. The original cost less(prenominal) any estimated residual value at the end of the cores vivification is spread over the expected carriage of the addition. Although the total amount of wear and tear over the additions vivification 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 to each one with a unlike origin; straight line depreciation method, the quicken depreciation method and the units-of-production depreciation method. The straight-line method spreads the expense evenly by effects and the deepen methods yield higher depreciation expense in the frontwards of time eld of an assets useful life and spurn depreciation expense in the later years piece the units-of-production meth od, bases depreciation expense for a given period on actual use. Companies use different depreciation methods for impose report and financial report 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 much hold value of the asset which increases the value of the company. Disadvantages: 1) benefit of tax income tax write-off is availed l ate. 2) In practical, annual benefit from t! he assets use decreases with age Accelerated method: profit: 1) This method allows more tax deduction in archean years 2) As asset depreciates faster, future expenses in the sustentation of the asset also decreases. 3) This method provides significant benefits in early years. This is beneficial as asset may become archaic or...If you want to get a full essay, order it on our website: OrderEssay.net

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