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When a company invests in a long-lived asset (a Long Term asset) it creates an accounting problem: if the asset had a limited useful life,
When a company invests in a long-lived asset (a Long Term asset) it creates an accounting problem: if the asset had a limited useful life, then at some point it will have a value of zero (or close to zero). The day we purchase the asset it has a high value, and someday it will have a minimal value- how to appropriately allocate the expense of the asset as er gradually reduce the value of the asset on the Balance Sheet? The process of "depreciation" was created to address that problem in accordance with the "matching concept" Explain (in two or three sentences) how depreciation conforms to the "matching concept".
Explain (in two or three sentences) how depreciation conforms to the "matching concept".
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