What is the purpose of preparing a depreciation schedule in the Fixed Asset Cycle?

Preparing a depreciation schedule serves a crucial role in the Fixed Asset Cycle by providing a systematic method for recognizing and allocating the cost of fixed assets over their useful life. This schedule details the depreciation expense that needs to be recorded periodically, which directly impacts the company's financial statements.

When a business purchases a fixed asset, it does not recognize the entire cost as an expense in the year of acquisition, as this would not accurately reflect the asset's expense related to its usage over time. Instead, the depreciation schedule helps to update the general ledger (GL) by allocating portions of the asset's cost as an expense in each accounting period, usually on a monthly or annual basis, depending on the accounting policies in place.

This process ensures that the financial records reflect the accurate value of the company's assets and the corresponding expenses, thereby providing stakeholders with reliable information regarding the company's financial position and performance. Additionally, updating the GL with depreciation expenses helps in tax calculations and financial reporting, ensuring compliance with accounting standards.

While updating GL records is vital, the other options do not pertain to the purpose of a depreciation schedule. Calculating employee benefits, documenting vendor transactions, and tracking inventory levels serve entirely different functions within the accounting and financial reporting landscape, which do not relate to the systematic