Most companies make adjusting entries for depreciation because:
A)Their plant assets lose market value over time.
B)The matching concept must be upheld in financial statements.
C)Both A and B.
D)Neither A nor B.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that matches the cost of an asset over its useful life. Since the matching concept requires expenses to be matched with their related revenues or benefits, companies make adjusting entries for depreciation to ensure that their financial statements accurately reflect the expenses of using their plant assets. Depreciation does not necessarily mean that plant assets lose market value over time, so option A is not accurate. Therefore, option C and D are incorrect.

Most Companies Make Adjusting Entries for Depreciation Because