Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Depreciation: Summary of Main Methods

Financial Accounting

8. Long Lived Assets

Depreciation: Summary of Main Methods

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Multiple Choice

Depreciation is the process of:

Estimating the market value of an asset at the end of its useful life

Allocating the cost of a tangible asset over its useful life

Recording the increase in value of an asset over time

Recognizing cash inflows from the sale of assets

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It reflects the wear and tear, usage, or obsolescence of the asset.

Identify the purpose of depreciation: The goal is not to estimate the market value of the asset or record increases in value, but to systematically allocate the asset's cost as an expense over the periods it benefits the business.

Clarify the incorrect options: Depreciation does not involve estimating the market value of an asset at the end of its useful life, nor does it record increases in value or recognize cash inflows from asset sales.

Focus on the correct definition: Depreciation is the process of allocating the cost of a tangible asset over its useful life, ensuring that the expense matches the revenue generated by the asset during its usage.

Relate depreciation to financial statements: Depreciation is recorded as an expense on the income statement and reduces the book value of the asset on the balance sheet over time.