Two alternative methods of accounting for the cost of oil and gas properties have been widely used.The method that capitalizes all costs associated with all wells is the

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The full-cost method is the most commonly used method in the oil and gas industry as it allows companies to capitalize all exploration, development, and production costs associated with all wells, regardless of whether they are successful or not. This method provides a more accurate picture of the overall financial health of the company and allows for easier comparisons with other companies in the industry. The successful-efforts method only capitalizes costs associated with successful wells, which can result in misleading financial statements and potential understatement of assets.

Two Alternative Methods of Accounting for the Cost of Oil