About This Chapter
Accounting for Depreciation - Chapter Summary and Learning Objectives
When making accounting projections for organizations, there are various factors to consider to see the big financial picture. One of those factors includes depreciation, which is the rate at which an item loses its value. The materials in this chapter discuss what causes depreciation, how to calculate depreciation, and additional calculation considerations. After you go through each individual lesson, you should be thoroughly acquainted with the following concepts:
- Depreciation methods
- Calculations for partial-year and accelerated depreciation
- The effects of estimation changes
- Determining the accumulated rate of depreciation
- Formulas for figuring out depreciation expenses
- Common practices for recording depreciation rates
|Methods of Depreciation||Identify the three distinct depreciation methods.|
|Accelerated Depreciation Methods||Establish the rate at which large vehicles and office equipment depreciate through two typical calculation methods.|
|Partial-Year Depreciation & Changes in Estimates||Decipher depreciation formulas for taxes, investigate the partial-year depreciation rate for bigger items, and discuss how estimation changes can alter depreciation calculations.|
|Accumulated Depreciation: Definition & Formula||Predict long-term depreciation rates for items, explain how to record these rates in ledgers, and figure out the current value of any asset.|
|How to Calculate Depreciation Expense: Definition & Formula||Study the three most used methods for determining depreciation expense calculations.|
|Reporting Depreciation on the Balance Sheet||Compare depreciation rates listed on income statements vs. balance sheets and discuss why these numbers do not always match.|
1. Methods of Depreciation
When completing financial reports, depreciation, or a loss in value, can be reported using three different methods: straight-line, double declining balance, and units of production. Learn to calculate depreciation using each of these methods.
2. Accelerated Depreciation Methods
Depreciation is the loss of value over time, calculated using accelerated depreciation calculations where the value is lost faster shortly after initial use, but later slows in depreciation. Learn the double declining balance method and see depreciation calculation in two examples.
3. Partial-Year Depreciation & Changes in Estimates
In accounting, depreciation is a method of allocating the value of assets to cover the time they are operational, as well as to recognize the assets' decreasing value as they age. Learn to define partial-year depreciation and changes in estimates, review taxes, explore the calculations for both partial-year and full-year depreciation, and understand how estimate revisions affect calculations.
4. Accumulated Depreciation: Definition & Formula
Accumulated depreciation reflects the decrease in value of a company's assets over time and from continued use, such as manufacturing equipment. Learn more about the definition of accumulated depreciation on an annualized basis and practice using the formula used to calculate it through examples.
5. Depreciation: Definition, Formula & Examples
Depreciation allows businesses to write off through taxes costs incurred through the operation of assets and is typically arrived at using the straight-line depreciation method. Learn the definition of the process of depreciation and the formula used to calculate it through examples.
6. Reporting Depreciation on the Balance Sheet
Depreciation, or the decrease in value of a company asset, is reported on financial statements. Learn the definition of depreciation and explore the differences between reporting depreciation on the balance sheet and the income statement.
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Other chapters within the Accounting 302: Advanced Accounting course
- Business Ownership Types
- Key Accounting Concepts
- Journals & Ledgers in Accounting
- Accounting Equations & Formulas
- Financial Statements, Balance Sheets & Income Statements
- Analyzing Financial Statements
- Financial Statement Ratios
- Accounting for Inventory
- Accounting for Compensation, Taxes & Liabilities
- Adjustments & Closing Entries
- Corporate Accounting
- Departmentalized Accounting
- Taxation for Corporations
- Business & Financial Forecasting
- Required Assignments for Accounting 302
- Studying for Accounting 302