Frequently Asked Questions
Why is depreciation important in law firm accounting?
Depreciation is important because it allows a law firm to allocate the cost of tangible assets, such as office equipment and furniture, over their useful lives. This allocation helps in matching expenses with revenues generated by the assets, providing a more accurate representation of the firm's financial performance.
How is depreciation calculated for law firm assets?
Depreciation can be calculated using different methods, such as straight-line, declining balance, or units of production. The straight-line method is commonly used and involves dividing the cost of the asset by its useful life to determine the annual depreciation expense. For example, if a law firm purchases office equipment for $10,000 with a useful life of 5 years, the annual depreciation expense would be $2,000 ($10,000/5 years).
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