Business Finance
business and finance question

Question Description

Does it make sense that longer-lived assets should be expensed over the life rather than in the year the item is paid for?

Final Answer

Yes, it does.  One of the fundamental tenets of accounting is that expenses and revenues should be "matched".  That is, we aim to recognize the expenses associated with generating revenue at the time the revenue is generated.  For example, if a business buys a car that it will use to deliver its products, and it is expected that the car will be used for the next 10 years to do so, then it wouldn't make sense to recognize the entire expense of the car upon purchase (as it will be used to deliver product - thus generate revenue - for the next 10 years).

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Alex Z (997)
New York University

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