Accounting Valuation

I am going to dissect the definitions of these four functions of accounting, and then we will determine their differences and why they are important to accountants. Depreciation is the allocation the cost of tangible assets during their lifespan. When it comes to Amortization it is the allocating the cost of intangible assets. Depletion is the allocation of natural resources to expense, over the resource's useful lifespan. Finally, let's speak about valuation; I had a little difficulty in trying to understand this particular function, According to "Accounting Valuation" (2012), "Valuation is the process of valuing a company's assets for financial-reporting purposes."

As we can all see, each of these functions help us to analyze assets during the asset's lifespan. We allocate the cost during the lifespan and we can either depreciate or amortize to help lengthen the lifespan of that specific asset. Depreciation governs tangible assets, depletion deals with natural resources, and amortization allocates intangible assets, while valuation values a company's assets. Each is important given their specific functions.

` Is it appropriate to calculate depreciation using two different methods? Yes, many companies use two or more methods. There are two basic methods of depreciation when it comes to depreciating an asset. These methods include the Straight-line, and the Declining Balance at either 200% or 150%. Choosing among these methods depends on how the company wants to receive depreciation expenses.

Choosing any of these accelerated methods has the benefit of receiving more depreciation benefits during the beginning of an asset's useful life, at the cost of receiving less in the future. However, many feel that this is appropriate as the asset is most valuable during the early stages of its life. Even though a company is able to select any method, the company should choose the best method that measures an assets worth or usefulness to the company towards the future. Planning for the future is critical as through time everything loses worth, so determining how much an asset will be worth in the future is critical in helping to decide which method a company uses for each asset to help maintain or strengthen its revenue capabilities.