Depreciation Flashcards
(3 cards)
1
Q
Straight Line Depreciation Def
A
The difference between what the value of the asset was and now is. Straight-Line Depreciation assumes it depreciates by an equal amount each year of its useful life.
2
Q
Depreciation Formula
A
(Original Cost - Residual Value) / Expected Life of the Asset
(in years)
3
Q
Why is it important for a business to depreciate their assets?
A
-Businesses will be overvalued as the true value of their used assets isn’t being reflected
-Knowing their real value they know to put money aside for new equipment in the future
-It is a legal requirement
