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Impact does the decreasing balance technique have on net income in the first year compared to other depreciation methods? Typically, it yields the lowest net income.
How does the technique of depreciation impact net income?
Net Income and Depreciation
When the cost of the asset is assigned on the income statement, a depreciation expense lowers net income. Depreciation is a method of accounting for decreases in a fixed asset's value over time. Property, plant, and equipment is often the fixed asset in most cases.
What distinguishes the decreasing balance technique of depreciation from other depreciation methods?
Each accounting period, the straight-line technique depreciates an asset by the same amount. When using the decreasing balance technique, more depreciation is allocated to the earlier years than in the final years of an asset's life.
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