Accounting in Business

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Running Head: Accounting in Business
ACCOUNTING IN BUSINESS

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Accounting in Business
Table of Contents
Description.......................................................................................................................................2
The straight-line method..................................................................................................................2
The productive output method.........................................................................................................2
The sum of the years’ digit method.................................................................................................2
Arguments for and against...............................................................................................................2
Selected method...............................................................................................................................3
References........................................................................................................................................5

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Accounting in Business
Description
The method of depreciation is used to determine costs for the products or assets that are likely to
lose value over time (Sigidov et al. 2016). In the case of the Atwater Manufacturing Company,
the new machine acts as the asset for which a cost needs to be set that will be dependent on its
usage and benefit throughout their life.
The straight-line method
In this method, the scrap value of the asset at the end of its life is deducted from its original
value. Scrap value refers to the value of the physical components of the machine when it is no
longer usable. The value after subtracting is divided by the number of years the machine is
expected to be of service.
The productive output method
This method uses the number of units produced by the machines in a year to account for its
productivity. It is used when the machine or the assets are more directly involved in the
production of goods.
The sum of the years’ digit method
In this method, the most amount of depreciation is associated with the product in its initial years
when the asset is in maximum use. This way can account for the rate of high depreciation in the
later years and the high productivity in the earlier years.
Arguments for and against
Method of depreciation Advantages Disadvantages
The straight-line method This method will allow the
company to calculate the asset
However, the process of
depreciation is not