Final answer:
Depreciation of PPE must account for the item's cost and its estimated useful life, allowing for accurate financial reporting of the asset's value decrease over time due to wear, tear, or obsolescence.
Step-by-step explanation:
When an item of PPE (Personal Protective Equipment) is depreciated, two things must be accounted for:
Original Cost: The initial cost of acquiring the PPE, which includes the purchase price and any associated costs like taxes and shipping.
Useful Life: The estimated period of time that the PPE can be used effectively before it becomes obsolete or needs replacement.
By considering these two factors, the depreciation expense can be calculated over the useful life of the PPE to allocate its cost gradually over time.
When we talk about the depreciation of an item of Personal Protective Equipment (PPE), we must take into account two critical factors. Firstly, the cost of the PPE asset needs to be considered; this is the entire purchase price of the item. Secondly, we need to evaluate the useful life of the PPE, which is the expected period over which the item will be used.
This accounting process is essential because PPE is a capital resource that, like other fixed assets, loses value over time due to wear and tear or obsolescence. Depreciation allows a company to account for that loss of value in their financial reporting and allocate the cost over the useful life of the PPE.