The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
To learn more, see Explanation of Depreciation.
Is depreciation an operating expense? Depreciation Could Be Either an Operating Expense or a Non-operating Expense Depreciation is an operating expense if the asset being depreciated is used in an organization’s main...
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
What is the difference between book depreciation and tax depreciation? Definition of Book Depreciation Book depreciation is the amount recorded in the company’s general ledger accounts and reported on the company’s...
Depreciation Expense for $2,000; credit Accumulated Depreciation Expense for $2,000. It is also possible that revenues were earned, but the sales invoice has not yet been issued. As a result, an adjusting entry will be...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
The depreciation method based on the number of units produced by the asset rather than on the passage of time. This method is also referred to as the units of activity method because depreciation is based on some...
See double declining balance method of depreciation.
See sum of the years’ digits method of depreciation.
See units of production method of depreciation.
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
An asset’s cost that has been assigned to Depreciation Expense.
, but this expense does not reduce the cash balance in the current accounting period. (The entry for depreciation is a debit to Depreciation Expense and a credit to Accumulated Depreciation). Therefore the...
The cumulative amount of depletion expense pertaining to the natural resources shown on the balance sheet. The account has a credit balance and will be reported on the balance sheet as a contra asset.
The term used in place of retained earnings when a corporation has a negative (debit) balance in its account Retained Earnings.
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
Insurance and Prepaid Expenses are asset accounts, their normal debit balance will be decreased with a credit entry. Since expenses usually have debit balances, Insurance Expense will be decreased with a credit entry....
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
A separate line within stockholders’ equity that reports the corporation’s cumulative income that has not been reported as part of net income on the corporation’s income statement. The items that would...
, Plant and Equipment. At that point, the depreciation of the addition will begin. (If a company is constructing an assembly line or a huge machine that will take time to build, the amounts would also be accumulated in...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
What is a controller's cushion? A controller’s cushion or controller’s reserve involves temporarily recording too much expense for an item that the controller calculates. For example, the controller might budget...
and the depreciation expense begins. This expense will reduce the company’s profits (net income, earnings). There may also be some additional revenues and costs, and perhaps cost savings, that will also affect the...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
Is the depreciation of delivery trucks a period cost or is it manufacturing overhead? The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be...
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