Question

What basic questions must be answered before the amount of the depreciation charge can be computed?

Short answer

Answer

The method of depreciation, the useful life of the asset, and the method of cost apportionment must be answered before computing the amount of the depreciation expense

Step-by-step solution

Meaning of Depreciation

Depreciation is an expense incurred on an asset that has become obsolete due to erosion and abrasion.An asset can be depreciated in various ways, which help bring the asset’s exact value at the time of sale.

Explaining the basic questions that must be answered before computing the amount of depreciation charge

Three essential questions must be answered before the amount of depreciation charge can be calculated:

1. How will the asset's depreciation be calculated?
2. How long will the item be useful?
3. What is the optimum technique of cost apportionment for this asset?