Mr. U an entrepreneur started his restaurant business last year and thinks that his business is doing well. He plans to expand his operations this year by opening other branches in Santiago City. However, he does not maintain proper financial records of his business. He does not believe in the benefits of accounting and proper record keeping. Provide a short narrative explaining to Mr. U the importance of accounting in his business.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Mr. U an entrepreneur started his restaurant business last year and thinks that his business is doing well. He plans to expand his operations this year by opening other branches in Santiago City. However, he does not maintain proper financial records of his business. He does not believe in the benefits of accounting and proper record keeping. Provide a short narrative explaining to Mr. U the importance of accounting in his business.
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