What is any method of depreciation called that records greater depreciation expense in the early years and less in the later years?

What is any method of depreciation called that records greater depreciation expense in the early years and less in the later years?

• A. Accelerated depreciation
• B. Straight-line depreciation
• C. Declining balance depreciation
• D. Sum-of-the-years'-digits depreciation

Answer: (A)

The method of depreciation that records greater depreciation expenses in the earlier years of an asset's life and gradually less in the later years is known as accelerated depreciation. This terminology encompasses various methods, including the declining balance method and the sum-of-the-years'-digits method, which are both specific types of accelerated depreciation. Accelerated depreciation is particularly useful for assets that are likely to lose value more quickly in their early years. This approach matches the expense of the asset's use against the revenues it generates more effectively during that time. By recognizing higher depreciation expenses early on, businesses can benefit from tax deductions sooner rather than later, thereby improving their cash flow in the short term. Straight-line depreciation, in contrast, spreads the cost of an asset evenly over its useful life, resulting in equal expense amounts each year. Since it does not allocate more expense to the early years, it does not qualify as accelerated depreciation. The other two types—declining balance and sum-of-the-years'-digits—are methods that also fall under the umbrella of accelerated depreciation and can be considered when discussing greater initial expense recognition. However, the overarching term for such approaches is accelerated depreciation, making it the correct answer.

The method of depreciation that records greater depreciation expenses in the earlier years of an asset's life and gradually less in the later years is known as accelerated depreciation. This terminology encompasses various methods, including the declining balance method and the sum-of-the-years'-digits method, which are both specific types of accelerated depreciation.

Accelerated depreciation is particularly useful for assets that are likely to lose value more quickly in their early years. This approach matches the expense of the asset's use against the revenues it generates more effectively during that time. By recognizing higher depreciation expenses early on, businesses can benefit from tax deductions sooner rather than later, thereby improving their cash flow in the short term.

Straight-line depreciation, in contrast, spreads the cost of an asset evenly over its useful life, resulting in equal expense amounts each year. Since it does not allocate more expense to the early years, it does not qualify as accelerated depreciation. The other two types—declining balance and sum-of-the-years'-digits—are methods that also fall under the umbrella of accelerated depreciation and can be considered when discussing greater initial expense recognition. However, the overarching term for such approaches is accelerated depreciation, making it the correct answer.