THE IMPACT OF DIFFERENT METHODS OF DEPRECIATION ON THE PROFITABILITY OF A COMPANY

1.0INTRODUCTION 
1.1BACKGROUND OF THE STUDY This research work is aimed at critically studying the different methods of depreciation and the impact on the profit ability of business enterprises. The different methods of providing for depreciation have been posing problems to many people because the understanding and the use of these methods provide varying depreciation expenses on the same fixed assets. In view of this, when profit is reported using different methods for a period, the reported income will vary under the different methods. Although most of the different methods of providing for depreciation expenses will be discussed in this work, the analysis is restricted to the straight-line, double  decline balance, reducing balance and the sum of the years methods of depreciation provision. Depreciation is a part of the cost of a fixed asset that is not receivable on disposed and is thus part of the cost of fixed asset consumed. During its periods of use by the firm. It is an expenses which is charged to the profit and loss account of a period before ascertaining the real net profit or loss of an enterprise.  According to Kermit Harson, depreciation is the expiration of plant assets quality of usefulness. In accounting, this term describes the process of allocating and charging the cost of the usefulness to the accounting periods that benefit from the asset’s use. The International Accounting Standard (IAS) defined depreciation as the allocation of depreciable amount of an asset over its estimated useful life. Depreciation for the accounting period is charged to the income either directly or indirectly. Depreciable assets comprises a significant portion of the assets of an enterprise.
TABLE OF CONTENTSTitle pageiiCertification iiiDedicationivAcknowledgement vTable of contentsvii
CHAPTER ONE1.0introduction 11.1background of the study11.2objective of the study21.3scope and limitation of the study31.4significance of the study41.5statement of the problem51.6identification of some terms7
CHAPTER TWO2.0review of related literature 92.1the nature of depreciation accounting 92.2causes of depreciation102.3methods of calculating depreciation112.4evaluation of depreciation method142.5the concept of profit152.6definition of profit162.7cost of a plant asset182.8estimated life of an asset192.9terminal value of an asset 20
CHAPTER THREE3.1Summary of findings213.2Recommendation223.3Conclusion233.4Bibliography25