Accelerated depreciation

Accelerated depreciation,

Definition of Accelerated depreciation:

  1. Accelerated depreciation methods tend to align the recognized rate of an asset’s depreciation with its actual use, although this isn’t technically required. This alignment tends to occur because an asset is most heavily used when it’s new, functional, and most efficient. .

  2. Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deprecation expenses in the early years of the life of an asset. Accelerated depreciation methods, such as double-declining balance (DDB), means there will be higher depreciation expenses in the first few years and lower expenses as the asset ages. This is unlike the straight-line depreciation method, which spreads the cost evenly over the life of an asset.

  3. Technique of computing depreciation at a rate that is faster than the rate of straight line depreciation. Two main methods employed in accelerated depreciation are (1) Declining balance depreciation and (2) Sum of the years digits depreciation. Both these methods write off larger proportion of an assets value in the early years of its life than in the later years. The justification for accelerated depreciation is that an asset is more valuable, and has more earning potential, in early years of its useful life. In later years the asset becomes less valuable due to its inevitable obsolescence, and deterioration due to wear and tear. Accelerated depreciation, however, changes only the timing of depreciation; the total depreciation amount chargeable on the asset remains the same.

How to use Accelerated depreciation in a sentence?

  1. Accelerated depreciation is unlike the straight-line deprecation method, where the latter spreads the depreciation expenses evenly over the life of the asset. .
  2. Companies may use accelerated depreciation for tax purposes, as these methods result in a deferment of tax liabilities since income is lower in earlier periods.
  3. Accelerated depreciation is any deprecation method that allows for the recognition of higher deprecation expenses during the earlier years. .
  4. The key accelerated deprecation methods include double-declining balance and sum of the years’ digits (SYD). .

Meaning of Accelerated depreciation & Accelerated depreciation Definition