18.1.2 - Why is Depreciation Necessary?
Enroll to start learning
You’ve not yet enrolled in this course. Please enroll for free to listen to audio lessons, classroom podcasts and take practice test.
Practice Questions
Test your understanding with targeted questions
What is depreciation?
💡 Hint: Think about how assets lose value.
Why is matching costs with revenues important?
💡 Hint: Consider what happens if costs are ignored.
4 more questions available
Interactive Quizzes
Quick quizzes to reinforce your learning
What does depreciation help achieve in accounting?
💡 Hint: Consider why expenses are matched with income.
True or False: Depreciation is not required under any accounting standards.
💡 Hint: Think about the consequences of ignoring accounting standards.
1 more question available
Challenge Problems
Push your limits with advanced challenges
A company buys a truck for $30,000, with a residual value of $3,000 and a useful life of 5 years. Calculate the annual depreciation using the straight-line method and describe its importance in financial reporting.
💡 Hint: Consider how the truck's value changes over the years.
How would a company’s decision to change its depreciation method from straight-line to declining balance affect its financial statements and cash flow management?
💡 Hint: Think about the implications of depreciation on cash flow and income reporting.
Get performance evaluation
Reference links
Supplementary resources to enhance your learning experience.