What fixed assets are and the matching principle

Reference no: EM133542131

Question: Assume that you are the accountant for Computer Consultants. Prior to this year, Computer Consultants operated out of a leased office. However, the company purchased its own office building this year. The building is in an area where real estate values have been increasing an average of 6 percent per year.

The owner of Computer Consultants has asked why you recorded depreciation on the building if real estate values are appreciating. Based on your knowledge of depreciation, answer the following questions:

1. Explain to the owner what fixed assets are and the matching principle.

2. How would you explain the reason why you recorded depreciation on the building, even though it has appreciated in value?

3. What type of account is "accumulated depreciation," and what are the benefits of using it?

Reference no: EM133542131

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