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The Corporate Finance Institute Accounting
Depreciation of Assets
When a long-term asset is purchased, it is often capitalized instead
To learn more, please of being expensed in the given period. This is because that asset will
check out our free online generally still be economically useful and generate returns beyond
accounting courses
that period, so expensing it in each period will overstate the expense
in that period and understate them in all future periods. To avoid this,
View courses depreciation expense is used to better match the expense of a long-
term asset to the revenue it generates.
There are different methods used to calculate depreciation expense,
and the type of depreciation accounting used is generally selected
to match the nature of the equipment. For example, for vehicles that
depreciate faster in the first few years, an accelerated depreciation
method is often chosen.
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