Answer to Question #240939 in Economics for CCW

Question

Econ. Chp. 4 Vocab:

make visual notes, acronyms, symbols, to help remember definitions

19) fixed costs -

20) depreciation -

Answer 1

Fixed costs - arise in the course of doing business for almost any company. The term can also be referred to as "operating costs". Although recurring payments are usually characteristic of fixed costs, this does not mean that the amount will be fixed. For example, an insurance company decides to purchase its own office space by taking out a floating rate mortgage.

Depreciation is a gradual transfer of the cost of fixed assets to the cost of goods (works, services). In the balance sheet, fixed assets are indicated at their residual value (initial cost less accrued depreciation).