Question

Why is accrual-based income not measured accurately if a fixed asset's entire cost is deducted as an expense in the year of purchase?

Answer 1

As per accrual basis of accounting revenue and expenses must be recorded on accrual (time) basis. It ignores the flow of cash for revenues and expenses. The basic idea of recording revenues and expenses on time basis is to match the revenue with the corresponding expenses, so the complete trail of the transaction can be seen. If the entire fixed asset cost is deducted at once as an expense, it will not match the revenue which is generated over the productive period of time the asset operates. The revenue from the asset will be earned over the years depending of the useful life of the asset Therefore the revenue will be scattered over the years. But if the entire cost of the fixed asset is deducted as an expense at once then the matching principle does not work nor the accrual concept.