# ECONOMICS

## COST ACCOUNTING

### BREAK EVEN POINT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Depreciation is:
 A It is a way to earn money with the sale of the business machinery B It is a method of joing the total cost of the equipment a business buys over the number of years it will be used C It is an accounting method of spreading the total cost of the equipment a business buys over the number of years it will be used.
Explanation:

Detailed explanation-1: -Depreciation is an accounting entry that represents the reduction of an asset’s cost over its useful life. In other words, depreciation spreads out the cost of an asset over the years, allocating how much of the asset that has been used up in a year, until the asset is obsolete or no longer in use.

Detailed explanation-2: -Amortization is an accounting method for spreading out the costs for the use of a long-term asset over the expected period the long-term asset will provide value. Amortization expenses account for the cost of long-term assets (like computers and vehicles) over the lifetime of their use.

Detailed explanation-3: -The term depreciation refers to an accounting method used to allocate the cost of a tangible or physical asset over its useful life. Depreciation represents how much of an asset’s value has been used. It allows companies to earn revenue from the assets they own by paying for them over a certain period of time.

Detailed explanation-4: -The straight-line depreciation method results in equal depreciation expenses spread evenly over the course of the asset’s useful life.

Detailed explanation-5: -Straight-Line Method: This is the most commonly used method for calculating depreciation. In order to calculate the value, the difference between the asset’s cost and the expected salvage value is divided by the total number of years a company expects to use it.

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