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How deprecaition interacts with prudence and matching concepts?

In: Business Accounting and Bookkeeping [Edit categories]

Answer:

Prudence concept tends to understate the profit . depreciation is a tool through which we record our losses , which means that our profit is declining .This means that depreciation is a supportive tool for reducing profit. Matching concept tends to record the expense to the revenue generated from the assets . Hence depreciation fulfils the requirements of both the concepts .

First answer by ID3715686667. Last edit by ID3715686667. Question popularity: 1 [recommend question].

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Relevant answers:

What is the matching concept?
conceptual (non-physical) object that has the attribute identical (exactly the same as something else)
What is prudence concept?
From the Webster's Online Dictionary: The prudence concept states that profits and inventory should never be over stated an losses must not be under stated . the concept must be use when producing...
What is and advantage of the matching concept?
By matching your income with the expenses of a given period.. you do not over-state nor under-state the value of the business thus giving you the "true" profit of the business. By matching your...
What is prudence concept for depreciation?
It means "don't try to claim that the property depreciates (loses value over time) faster than the IRS thinks is reasonable". The IRS forms will generally give you guidance or a tax acccountant does...
What is an example of the prudence concept?
The concept of prudence usually applies to the question of when you should recognise profit. A basic example would the fact that you record inventory in your accounts at the lower of cost and net...