Concept of Depreciation

2. Calculating procedures for the several methods of depreciation.

3. The comparative effects of the different methods of depreciation on managerial decisions, with particular emphasis on financial management.

4. Advantages and disadvantages of the use of the different methods of depreciation for the user under different economic conditions.

Depreciation is the reduction in the value of an asset, which occurs through wear and tear (Bierman, 1975, p. 128). As a product of wear and tear, depreciation is different from obsolescence, which is an unforseen change in the value of an asset resulting from technological or economic change (Bodenhorn, 1964, pp. 138-149). In the operation of a profit oriented company, an allowance for the depreciation of the company's assets is always made before the operational profit of the company is calculated (Haley and Schall, 1973, p. 204). The deduction of depreciation in the determination of profit is based upon grounds that the consumption of capital assets is one of the legit

. . .
the asset to a company (Niswonger and Fess, 1977, p. 244). The use of accelerated depreciation is done for the purpose of reducing federal income tax liabilities of companies, rather than for sound accounting reasons. From the standpoint of the federal government, accelerated depreciation is worth the cost to the government in immediate revenues because it will stimulate industrial growth, thereby increasing government revenues over the long-term. From a company's standpoint, accelerated depreciation can serve as a strong incentive for investment in capital assets, because the total cash outlay for an asset may be recovered through income tax deductions in only a small fraction of the estimated useful life of the asset. Depreciation methods such as the declining balance method and the sum of the years digits method are often referred to as accelerated methods of depreciation because they provide higher annual depreciation deductions in the earlier years of the useful life of an asset than does the straight line method; however, federal income tax laws, which are revised from time-to-time, include a variety of methods for the acceleration of depreciation other than these methods, which include: 1. A reduction in the time p
. . .

Some common words found in the essay are:
Niswonger Fess, Forms Depreciation, Calculating Depreciation, CALCULATING DEPRECIATION, Welshans Melicher, Computation Depreciable, Computation Sum, Digits Method, Claimed Units, Van Horne, useful life, value asset, initial cost, useful life asset, life asset, methods depreciation, straight line, declining balance, method depreciation, depreciable value, salvage value, depreciable value asset, declining balance method, federal income tax, straight line method,
Approximate Word count = 3689
Approximate Pages = 15 (250 words per page)

More Essays on Concept of Depreciation