Why are the costs of plant/long term assets recovered through depreciation vs. expensed out during the...
Why are the costs of plant/long term assets recovered through depreciation vs. expensed out during the period purchased?
Homework Answers
Depreciation is basically the cost of using the assets over the period of life of assets.
If the assets are expensed of in the year of purchase, the cost will be recognised in a particular year whereas the company will get the benefit of using the asset over a particular period.
Depreciation allows the companies to spread out the cost over a period and generate revenue from it.Also, one of the purpose of depreciating the asset is to comply with the matching concept of the accounting i.e. all expenses and revenue should be recognised in the same period to which these pertain inspite of the fact in the period in which the cash is paid for the expense.
Hence, the assets are depreciated over a period and not expensed off in the year in which the same is purchased.
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Why are the costs of plant/long term assets recovered through
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Why are the costs of plant/long term assets recovered through depreciation vs. expensed out during the...
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