Briefly describe the accounting for the acquisition and use of equipment and indicate which accounts are involved in accounting for equipment and what types of accounts are these?
What will be an ideal response?
Answer: Initially, the most objective information regarding the value of equipment is its cost. As a result, the accountant preserves the record of historical cost in a non-current tangible asset account (Equipment) and records the estimated depreciation expense (Depreciation Expense) on the income statement and reduces the value of the equipment on the balance sheet in the separate contra-asset account (Accumulated Depreciation - Equipment). For financial statement purposes, firms report the net book value as a single line item (Equipment minus Accumulated Depreciation - Equipment).
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