Accelerated Depreciation

The Accelerated depreciation is the recognition of greater amounts of depreciation in the early years of use of the plant asset and reduced amounts in the coming years. Accelerated depreciation is automatically recognized with the units of productions method, since this method recognizes that use may be greater in the early years of the asset. Some assets may not be appropriately depreciated using the units of production or the straight-line method, if a greater amount of depreciation should be recognized in the early years.  

An automobile used in the business might normally be depreciated using the straight-line method, and yet this method may not adequately reflect the use made of the automobile. If the productivity of the automobile is greater in its earlier years of use, a form of accelerated depreciation should be used. For many plant assets, maintenance and repair costs increase the longer the asset is kept in service. An automobile may not be subject to repair charges within the first 2 or 3 years of its use, but it can be expected to incur greater repair costs as the year progress. When accelerated depreciation in the earlier years and lower depreciation in the later years are recognized, the later maintenance and repair costs tend to equalize the overall cost recognition for the assets being depreciated. This philosophy is consistent with the basic accounting concept of matching cost and revenue. In the financial accounting there are two popular methods of accelerated depreciation are used   such as the SYD method and declining balance method. For  the financial accounting reasons, the accelerated depreciation method is usually utilized when the  asset is likely to be a lot more productive during its early years therefore  the depreciation expense would more precisely shows how much of the asset’s usefulness is being utilized up every year.

Questionnaire:

• What is accelerated depreciation?
• What are the uses of accelerated depreciation method?