What is Hy depreciation method?
HY = Half-Year: Depreciation is halved for the first and last year once it is in service. MY = Modified Half-Year: If put into service before the midpoint of the year, the fixed asset receives a full year of depreciation for the first year, but none on the last.
Why is depreciation a cost?
Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset. Depreciation cannot be considered a variable cost, since it does not vary with activity volume.
Which of the following describes the process of depreciation?
Depreciation, in accounting, is a process that results in: spreading the cost of an asset over its useful life to the entity.
What is true depreciation?
Depreciation requires you to expense long-term asset costs in the period in which it was acquired. Depreciation will only affect the balance sheet. Depreciation does not affect the book value of assets. Depreciation matches long-term asset costs to the same periods in which the asset produce revenue.
What are the objectives of a fixed asset system?
a. Process the acquisition of fixed assets as needed and in accordance with formal management approval and procedures. b. Maintain adequate accounting records of asset acquisition, cost, description, and physical location in the organization.
What are the features of a good fixed asset system?
Key Characteristics of a Fixed Asset
- They have a useful life of more than one year.
- They can be depreciated.
- They are used in business operations and provide a long-term financial benefit.
- They are illiquid.
Why is fixed asset management important?
Fixed asset management enables organizations to monitor equipment and vehicles, assess their condition, and keep them in good working order. In this way, they minimize lost inventory, equipment failures and downtime — and improve an asset’s lifetime value.