depreciation Flashcards
1
Q
what is depreciation
A
allocation of the cost of non current asset over its estimated useful life
2
Q
causes of depreciation?
A
obsolescence,wear and tear,usage,legal limits
3
Q
why need depreciation?
A
According to matching theory,expenses incurred mist be matched against income earned in the same period to determine the profit of the period.Business must match cost of dep to income earned using nca to determine profit for period.
4
Q
methods of dep
A
straight line method ( on cost )
reducing balance method ( nbv )
5
Q
how shld nca be valued in sfpos
A
at original cost less accumulated depreciation
