Unformatted text preview: ment (cap. exp.) is a long-term prepayment
of an expense.
of The expense is prepaid in advance of the use of
an asset, and is recorded as an asset.
an As economic service life of an asset expires, the
cost of the asset is systematically allocated to
operations as an expense called depreciation.
depreciation Basic Concepts & Methods of Depreciation
Basic Costs of three kinds of operational assets are
matched with revenue over the useful lives of the
assets – the three related expenses are:
2. 3. Depreciation – The accounting process of allocating periodic
expiration of the cost of tangible property, plant and equipment
against the periodic revenue earned.
Depletion – The accounting process of allocating the periodic
expiration of the cost of an asset that is a natural resource,
such as mineral deposits and timber, against the periodic
Amortization – The accounting process of allocating the
periodic expiration of the costs of intangible assets,...
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