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Financial Management: Depreciation and Amortization Concepts

4-5 paragraphs

Your friend Lucy slept through a class in which her professor explained the concepts of depreciation and amortization. Use the Library's Accounting links and/or dictionary sources and the Internet to learn about these concepts, and then write a 4-5 paragraph explanation of the concepts for Lucy. Be sure to cite your sources.

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The response addresses the queries posted in 601 words with references.

//Deprecation and Amortization are the two important concepts of Accounting. They help in assessing the value of the fixed assets that are held by the businesses. Different concepts and methods of depreciation and amortization are used by the firms differently. At first, we will start with providing an introduction to depreciation and its concepts. //

Depreciation is considered as an expense that is charged on the firm's fixed assets. The assets lose their value over a period of time due to various reasons. These can be obsolescence, damage or simply by the use or wear off (Saliers, 1980).Depreciation thus, through different methods calculates the value of the asset and reduces the value. It is an important accounting term that is utilized to find out the residual value of an asset. The assets therefore, can be shown in the Balance sheet on residual value (cost-depreciation) or on the original cost.

Depreciation is generally, calculated every year, and charged against the profits of the company as a non- cash item or ...

Solution Summary

This solution discusses how depreciation and amortization are used to assess the value of a business's fixed assets in 601 words with in-text citations and six references.