What is the effect of using different depreciation methods on the trial balance?
Practice Questions
1 question
Q1
What is the effect of using different depreciation methods on the trial balance?
It affects only the asset accounts.
It affects only the expense accounts.
It affects both asset and expense accounts.
It has no effect on the trial balance.
Different depreciation methods affect both the asset accounts (accumulated depreciation) and the expense accounts (depreciation expense) on the trial balance.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the effect of using different depreciation methods on the trial balance?
Solution: Different depreciation methods affect both the asset accounts (accumulated depreciation) and the expense accounts (depreciation expense) on the trial balance.
Steps: 6
Step 1: Understand what depreciation is. Depreciation is the process of allocating the cost of a tangible asset over its useful life.
Step 2: Learn about different depreciation methods. Common methods include straight-line, declining balance, and units of production.
Step 3: Know that each method calculates depreciation differently, which affects the amounts recorded in financial statements.
Step 4: Realize that depreciation affects two main accounts: 'Accumulated Depreciation' (a contra asset account) and 'Depreciation Expense' (an expense account).
Step 5: Understand that using a different method will change the amount of depreciation expense recorded each period.
Step 6: Recognize that these changes will impact the trial balance, showing different totals for assets and expenses depending on the method used.
