What is the major purpose of depreciation?
A)to provide for the replacement of the asset.
B)to spread the cost of the asset over its useful life, so that the cost of using it up is matched against income earned.
C)to adjust the asset to its expected market value.
D)none of the above.

Question

Quizplus · Accepted Answer

The major purpose of depreciation is to spread the cost of an asset over its useful life, allowing for a more accurate matching of expenses with the revenue generated by the asset. This helps to ensure that the company's financial statements accurately reflect the costs of doing business and the related revenues earned. Option A is a secondary purpose of depreciation, as it helps to accumulate funds over time for the replacement of the asset. Option C refers to impairment or write-downs, which are separate from depreciation. Option D is incorrect, as depreciation is an important concept in accounting and finance.

What Is the Major Purpose of Depreciation