xplanation

Bonus depreciation refers to the provision of paying lower taxes in a year, wherein the large portion of a fixed asset is being depreciated in the year in which it is being purchased. It helps in creating additional value in the beginning and simultaneously paying lower taxes. It assists in better cash flow management of the entity.

Verified Answer

A type of tax incentive, wherein the firms are allowed to deduct a large percentage of the cost of the asset in the beginning to decrease the taxable income of a firm, is known as bonus depreciation.