With direct write off, one writes off amounts from sales in the past are determined to be uncollectible. An estimate writes off estimated amounts of current sales that are expected to be uncollectible. Does that help you determine the accounting principle used for estimates? And a fixed asset question: when an asset is fully depreciated (think Kate's Cards after four years when the equipment with cost of $4,800 has accumulated depreciation of $4,800), should a company keep it on the books? Why or why not?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
With direct write off, one writes off amounts from sales in the past are determined to be uncollectible. An estimate writes off estimated amounts of current sales that are expected to be uncollectible. Does that help you determine the accounting principle used for estimates?
And a fixed asset question: when an asset is fully
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