Module 6: Depreciation & Fundamentals of Financial Accounting

Question 1

why is the concept of depreciation needed in EE? (2 reasons)

Answer 1

1. to understand financial accounting documents like the Balance Sheet and Income Statement
2. To make informed asset replacement decisions

Question 2

what would be considered ‘Capital Assets’?

Answer 2

infrastructure, buildings, equipment, machinery, tools

Question 3

what is depreciation?

Answer 3

it is the loss of a capital asset’s value over time due to factors like wear and tear, aging, or becoming outdated

Question 4

what are 3 fundamental reasons for depreciation?

Answer 4

1. Use-related loss, i.e., wearing out of a machine
2. Time-related loss, i.e., loss of an assets value due to environmental factors (rust, mold)