Which of the following statements most appropriately describes the purpose of depreciation of a long-lived tangible asset?
A)To indicate how the asset has physically deteriorated.
B)To show that the asset will eventually and gradually become obsolete.
C)To record that the asset's market value declines over time.
D)To match the cost of the asset to the period in which it generates revenue.

Question

Quizplus · Accepted Answer

Depreciation is a method of allocating the cost of a long-lived tangible asset over its useful life in order to match the cost of the asset to the period in which it generates revenue. It does not necessarily indicate physical deterioration or market value decline, although these factors may be taken into account when determining the asset's useful life and salvage value.

Which of the Following Statements Most Appropriately Describes the Purpose