depreciation - BookDepreciation Accountingfor...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
    Book Depreciation
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Accounting for  Depreciation and Income Taxes Asset Depreciation Book Depreciation Tax Depreciation How to Determine “Accounting Profit” Corporate Taxes
Background image of page 2
Depreciation Definition : Loss of value for a fixed asset Example : You purchased a car worth $15,000 at the beginning of year 2000. Depreciation End of Year Market Value Loss of Value 0 1 2 3 4 5 $15,000 10,000 8,000 6,000 5,000 4,000 $5,000 2,000 2,000 1,000 1,000 p
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Why Do We Consider Depreciation? Gross Income -Expenses: (Cost of goods sold) ( Depreciation ) (operating expenses) Taxable Income - Income taxes Net income (profit) Business Expense : Depreciation is viewed as a part of business expenses that reduce taxable income.
Background image of page 4
Depreciation Concept Economic Depreciation Purchase Price Market Value (Economic losses due to both physical deterioration and technological obsolescence) Accounting Depreciation A systematic allocation of the cost basis over a period of time. Accounting depreciation is a way of writing off the  investment on fixed assets by prorating over a certain  period.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Asset Depreciation Depreciation Economic depreciation the gradual decrease in utility in an asset with use and time Accounting depreciation The systematic allocation of an asset’s value in portions over its depreciable life—often used in engineering economic analysis Physical depreciation Functional depreciation Book depreciation Tax depreciation
Background image of page 6
Factors to Consider in Asset  Depreciation Depreciable life ( how long? ) Salvage value ( disposal value ) Cost basis ( depreciation basis ) Method of depreciation ( how? )
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What Can Be Depreciated? Assets used in business
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 22

depreciation - BookDepreciation Accountingfor...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online