It is expected that the service potential of a non-current asset will decline over time.The appropriate accounting treatment is to:
A) Amortise the asset over its useful life.
B) Disclose the effect in the notes to the balance sheet if it is material in nature.
C) Write-off the asset.
D) Accrue the difference as a payable in adjusting entries at the end of the period.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Non-current assets, such as machinery or equipment, are expected to have a limited useful life. This means that their service potential will decline over time. The appropriate accounting treatment for this is to amortise the asset over its useful life. This means that the cost of the asset is gradually written off over the period of time that it is expected to be in use. This reflects the fact that the asset is ultimately of limited value to the business. It also ensures that the balance sheet reflects the true value of the asset over time.

It Is Expected That the Service Potential of a Non-Current