Depreciation and Amortization Concepts
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Details: Your friend Lucy slept through a class in which her professor explained the concepts of depreciation and amortization. Use the Cybrary's Accounting links and/or dictionary sources and the Internet to learn about these concepts, and then write an explanation of the concepts for Lucy. Be sure to cite your sources.
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Solution Summary
Explanations of depreciation and amortization are given in 407 words with references.
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Depreciation
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"A company needs to report depreciation accurately in its financial statements in order to achieve two main objectives. First, to match its expenses with the income generated by means of those expenses. Second, to ensure that the asset values in the balance sheet are not overstated. An asset acquired in Year 1 is unlikely to be worth the same amount in Year 5.
Depreciation is an average or expected view of the decline in value of an asset. For example, an entity may depreciate its equipment by 15% per year. This rate should be reasonable in aggregate (such as when a manufacturing company is looking at all of its machinery), but ...
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