What Three Questions Must Be Answered Before the Amount of the Depreciation

question 11

Essay

What three questions must be answered before the amount of the depreciation charge can be computed?

Understand the principles of fair value accounting and its application to investment valuation.

Calculate and interpret the dividend yield on common stock.

Identify the contents and exclusions of management's discussion and analysis in annual reports.

Recognize how and where different types of financial statement items, such as losses on disposal and changes in accounting methods, are reported.

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Definitions:

Operating Cycle

The time period between purchasing raw materials and collecting cash from selling finished goods, measuring the efficiency of a company's operations and cash flow.

Extraordinary Item

Unusual and infrequent gains or losses on a company's financial statements, not expected to recur in the foreseeable future, a concept that has been phased out in many accounting standards.

Income Statement

A report detailing a business's income and outgoings within a set timeframe, culminating in a final profit or loss.

Period Costs

Expenses recognized in the income statement in the period they are incurred, not directly tied to the production process and therefore not inventoriable.