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

Question

Quizplus · Accepted Answer

Depreciation is charged to spread the cost of an asset over its useful life so that the cost of using it up is matched against the income earned by using it. It is a non-cash expense that reflects the wear and tear of an asset over time. Thus, option C is the correct answer. Option A is incorrect because the purpose of charging depreciation is not to adjust an asset to its expected market value; instead, it reflects the cost of using up the asset. Option B is also incorrect because depreciation does not provide for the replacement of an asset; it only reflects its historical cost.

The Major Purpose of Charging Depreciation Is