15RQ - Horngren'S Financial And Managerial Accounting

Question

What is a natural resource? What is the process by which businesses spread the allocation of a natural resource’s cost over its usage?

Step-by-Step Solution

Answer

Natural resources are assets that come from the earth and the process of spreading the allocation of natural resources is known as depletion.

Definition of natural resources

Natural resources are defined as the assets which come from the earth that are consumed. Some examples of natural resources include iron ore, oil, natural gas, diamonds, etc.

Process by which businesses spread the allocation of a natural resource’s cost over its usage

The depletion is a process by which businesses spread the allocation of a natural resource’s cost to expense over its usage. It is known as the depletion as the allocation of natural resources is done as the assets of the companies get depleted as used.