2 Allocation Problems – Depreciation

Periodic allocation of asset potential is necessary in order to open enterprise efforts and achievements to analytical study. Productive assets are purchased and used for their inherent power to contribute to the creation of new products and to the achievement of revenue. Management’s decisions direct this asset acquisition and use toward the end of achieving earned revenue in excess to applicable cost-expense efforts. Acquisition costs and liability obligations (reported in the balance sheet) are therefore necessary antecedents to enterprise service effectiveness. As such, accounting is failing in its primary function if it deals ineffectively with data expressive of those enterprise efforts and achievements.