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Summary

This chapter discussed the process of valuing fixed assets—usually defined as a company's property, plant, and equipment—for the purposes of determining the company's worth as well as its income for an accounting period.

An asset contributes to the creation of a company's revenue during the time that it is in service. The principle of matching expenses to revenue over time suggests that some portion of the expense involved in acquiring the asset be attributed to the revenue created during an accounting period. This is done by means of depreciation: even though the entire cash outlay for the asset usually occurs during the first accounting period, this expense is distributed across the useful life of the asset.


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