What is the main advantage of using the Units of Production Method for depreciation?
Practice Questions
1 question
Q1
What is the main advantage of using the Units of Production Method for depreciation?
Simplicity
Matching Expenses with Revenue
Tax Benefits
Consistency
The Units of Production Method matches the expense of depreciation with the actual usage of the asset, providing a more accurate reflection of the asset's contribution to revenue.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the main advantage of using the Units of Production Method for depreciation?
Solution: The Units of Production Method matches the expense of depreciation with the actual usage of the asset, providing a more accurate reflection of the asset's contribution to revenue.
Steps: 4
Step 1: Understand what depreciation is. Depreciation is the way we spread out the cost of an asset over its useful life.
Step 2: Learn about the Units of Production Method. This method calculates depreciation based on how much the asset is used, not just time.
Step 3: Realize the main advantage. The main advantage is that it matches the cost of using the asset with how much it actually contributes to making money.
Step 4: Think about accuracy. This method gives a clearer picture of how much the asset is worth as it gets used, making financial reports more accurate.
