A Further Study of Depreciation.
The article represents a continuation of a previous paper on depreciation, published in the October 1961 issue of the periodical The Accounting Review. The previous article suggested that the depreciation charge for a period is related to the expectations at the time of purchase and that the purchase of an asset is actually the purchase of future cash proceeds. These cash proceeds then become the basis for the depreciation calculation. The present article will refine the definition of cash proceeds with the objective of making the accounting for the events consistent with the decision-making procedures. The article shows that the use of cash proceeds in computing depreciation is correct only in the unlikely set of circumstances where the time-adjusted measures of revenues and expenses coincide with the cash flow computation. If the two are different for any period, then it is desirable to reconcile the two numbers. To avoid confusion with accounting practices that may not be accurate enough for the purposes of this article, it is desirable to use the terms time adjusted revenues and time adjusted expenses to describe items that appropriately take into consideration the time value of money.
- DOI
- 10.2308/tar-4487367
- Volume
- 41 (2)
- Pages
- 271-274
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref