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This helpful, relevant, and easy-to-read study resource reflects the AccountingCoach’s many years of teaching and business consulting. The sum of all depreciation recorded to date is called accumulated depreciation. In the straight-line method, a percentage of the original cost is written off every year. As a result, the amount of depreciation is uniform every year. Land is a non-depreciable asset since it does not have a fixed useful life.
Which of the following is a characteristic of the straight-line method of depreciation?
If you have any difficulty answering the questions, learn more about this topic by reading our mini-lectures covering introductory to Depreciation. These videos include everything you need to know as a beginner starting out in bookkeeping. We walk you through all the necessary concepts like debits and credits, general ledger accounts, double-entry, how to create an invoice in quickbooks adjusting entries, bank reconciliation, and more. Impairment method is not a method of depreciation. Useful life refers to an accounting estimate of the number of years it is likely to remain in service for the purpose of cost-effective revenue generation. None of them is the correct answer as the other ones are intangible assets and may only be amortized.
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- In the straight-line method, a percentage of the original cost is written off every year.
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- Depreciation is a reduction in the value of fixed assets caused by normal usage, wear and tear, new technology, and unfavourable market conditions.
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Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting. With progress tracking, your AccountingCoach learning path will be easy to visualize, helping you stay motivated and on-track as you move through the lessons. Learn the fundamental components of the balance sheet, income statement, and cash flow statement. We walk you through, line by line, each financial statement so that you’ll know exactly what everything means. Tools and equipment are tangible fixed assets therefore they are depreciated. AccountingCoach PRO explains the fundamentals of accounting in simple, easy to grasp terms, with examples family members can to reinforce everything you learn.
- Note – Please take our quiz ‘Quiz 39 – Depreciation – (Answers)‘ on this page before going through the below answers.
- Tools and equipment are tangible fixed assets therefore they are depreciated.
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Depreciation and Financial Statements Quiz
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The main reasons for this list are the first two. ‘Original cost method‘ is another name used for the straight-line method. It is a valuation account. Such an account is paired with an asset or liability, it offsets the value of the paired account. Also known as a ‘Contra’ account.
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Depreciation is charged on the income statement as an expense. A depreciation method where you take more depreciation expense in earlier years and less in later years. Accounting isn’t just for accountants. Today, everyone needs to improve their financial literacy. For men and women who want to master accounting and take full control of their careers, AccountingCoach PRO is the clear choice. Earn our unique badges and points as you track your progress and complete various milestones.
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Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
How does depreciation affect the financial statements?
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness. Office equipment was purchased for $155,000. Its useful life is 5 years and the residual value is $20,000. For each question click on an answer to reveal whether its Right!
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To calculate depreciation, you should use the straight-line method. Subtract the salvage amount from the asset cost and divide the balance by the number of periods in the asset’s practical life. Take this quiz to understand more about depreciation accounting.
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Depreciation is revenue in nature and it is debited to the profit and loss account. Note – Please take our quiz ‘Quiz 39 – Depreciation – (Answers)‘ on this page before going through the below answers. Only the top 3% of 8 best accounting software for the self-employed in 2023 our audience scored 10/10 in all of them.
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Accelerated depreciation methods allow more depreciation early on compared to straight-line. Subtract the salvage value from the purchase price and divide by the useful life. Depreciation is charged due to normal usage, wear and tear, unfavourable conditions, etc.