Which of these is not an accepted method for calculating depreciation?
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Answer: C. Discounted present value Method
Explanation
Discounted present value is a valuation or investment appraisal technique, not an accepted method for calculating accounting depreciation. Standard accounting depreciation allocates historical asset costs systematically over estimated useful service lives. Recognized depreciation methods include straight-line, declining balance, and sum-of-the-years-digits formulas. Depreciation accounting focuses on cost allocation rather than attempting to reflect fluctuating market asset values. Discounted cash flow models are used in capital budgeting to evaluate project profitability and present values. Regulatory accounting frameworks explicitly approve specific depreciation formulas while rejecting present value depreciation.
Financial accountants apply straight-line depreciation to office furniture to match expenses with revenue periods. Investment analysts use discounted present value methods when evaluating long-term corporate acquisition proposals. Confusing valuation techniques with cost allocation methods leads to non-compliant financial statement reporting. Straight line Method is an accepted accounting depreciation technique allocating equal expense amounts annually. Written down value Method is a recognized accelerated depreciation method based on reduced book values. Sum of digits Method is an accepted accelerated depreciation technique used in financial accounting practice.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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