Systematic and rational allocation is recording depreciation on fixed assets is an example of which approach to expense recognition. Systematic allocation means that the depreciation is charged according to a consistent policy and method. For example the depreciation can be charged on straight line basis, reducing balance method or accelerated method.
An entity can only recognise an asset on the balance sheet if and only if it is probable . more likely than not that future economic benefits associated with the item will flow to the entity and. the cost of the item can be reliably measured.
In this context it means that a company's annual depreciation expense reported on its financial statements should be based on a formula that is logical consistently applied. Objective and acceptable to another unbiased accountant.
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