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Please explain this line and an example would be great.
“Depreciation matches cost of using non-current asset to revenue generated by asset over its useful life.”I explain this in my free lectures and give examples!!!
The cost of a machine is a cost of running the business just like any other expense. The difference from an expense like electricity is that instead of spending money every year it is only spent (say) every 5 years if the machine lasts 5 years. So instead of have a big expense every 5 years with no expense in the other years we spread it and change part of it each year just as the machine is earning money for us each year.
Do watch the lectures! They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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