The Impact Of Different Methods Of Depreciation On The Profitability Of A Company

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

This research work is aimed at critically studying the different methods of depreciation and the impact on the profit ability of business enterprises.

The different methods of providing for depreciation have been posing problems to many people because the understanding and the use of these methods provide varying depreciation expenses on the same fixed assets. In view of this, when profit is reported using different methods for a period, the reported income will vary under the different methods.

Although most of the different methods of providing for depreciation expenses will be discussed in this work, the analysis is restricted to the straight-line, double decline balance, reducing balance and the sum of the years methods of depreciation provision.

Depreciation is a part of the cost of a fixed asset that is not receivable on disposed and is thus part of the cost of fixed asset consumed. During its periods of use by the firm. It is an expenses which is charged to the profit and loss account of a period before ascertaining the real net profit or loss of an enterprise.

According to Kermit Harson, depreciation is the expiration of plant assets quality of usefulness. In accounting, this term describes the process of allocating and charging the cost of the usefulness to the accounting periods that benefit from the asset’s use.

The International Accounting Standard (IAS) defined depreciation as the allocation of depreciable amount of an asset over its estimated useful life. Depreciation for the accounting period is charged to the income either directly or indirectly. Depreciable assets comprises a significant portion of the assets of an enterprise.

TABLE OF CONTENTS

Title page ii

Certification iii

Dedication iv

Acknowledgement v

Table of contents vii

CHAPTER ONE

1.0 introduction 1

1.1 background of the study 1

1.2 objective of the study 2

1.3 scope and limitation of the study 3

1.4 significance of the study 4

1.5 statement of the problem 5

1.6 identification of some terms 7

CHAPTER TWO

2.0 review of related literature 9

2.1 the nature of depreciation accounting 9

2.2 causes of depreciation 10

2.3 methods of calculating depreciation 11

2.4 evaluation of depreciation method 14

2.5 the concept of profit 15

2.6 definition of profit 16

2.7 cost of a plant asset 18

2.8 estimated life of an asset 19

2.9 terminal value of an asset 20

CHAPTER THREE

3.1 Summary of findings 21

3.2 Recommendation 22

3.3 Conclusion 23

3.4 Bibliography 25

Disclaimer: Note this academic material is intended as a guide for your academic research work. Do not copy word for word. Note: For Computer or Programming related works, some works might not contain source codes

CITE THIS WORK

(2014, 11). The Impact Of Different Methods Of Depreciation On The Profitability Of A Company.. ProjectStoc.com. Retrieved 11, 2014, from https://projectstoc.com/read/4230/the-impact-of-different-methods-of-depreciation-on-the-profitability-of-a-company-5331

"The Impact Of Different Methods Of Depreciation On The Profitability Of A Company." ProjectStoc.com. 11 2014. 2014. 11 2014 <https://projectstoc.com/read/4230/the-impact-of-different-methods-of-depreciation-on-the-profitability-of-a-company-5331>.

"The Impact Of Different Methods Of Depreciation On The Profitability Of A Company.." ProjectStoc.com. ProjectStoc.com, 11 2014. Web. 11 2014. <https://projectstoc.com/read/4230/the-impact-of-different-methods-of-depreciation-on-the-profitability-of-a-company-5331>.

"The Impact Of Different Methods Of Depreciation On The Profitability Of A Company.." ProjectStoc.com. 11, 2014. Accessed 11, 2014. https://projectstoc.com/read/4230/the-impact-of-different-methods-of-depreciation-on-the-profitability-of-a-company-5331.

The Impact Of Different Methods Of Depreciation On The Profitability Of A Company

CITE THIS WORK

Browse Topics

Connect with Us

Support Team