Final answer:
The depreciation method that best matches revenues with expenses if revenues generated by the asset are higher (or lower) at the beginning of the asset's life is the declining balance method.
Step-by-step explanation:
The depreciation method that best matches revenues with expenses if revenues generated by the asset are higher (or lower) at the beginning of the asset's life is the declining balance method.
The declining balance method is an accelerated depreciation method that allocates a higher proportion of the asset's cost to the earlier years of its life. This matches the higher revenues generated by the asset at the beginning of its life. As the asset ages and its revenue-generating capability decreases, the depreciation expense decreases, allowing for a better match between revenues and expenses.
For example, let's say a company purchases a machine that generates higher revenues in its early years. By using the declining balance method, the company can allocate more of the machine's cost as an expense in the early years, which aligns with the higher revenues. As the machine ages, the depreciation expense decreases, aligning with the decreasing revenue-generating capability.