With respect to the relationship between depreciation and cash, which one of the following statements is incorrect?
A) Accumulated depreciation is the total amount of the original cost of an asset already written off to expense in prior periods.
B) Depreciation does not generate cash.
C) Depreciation is an allocation of the original cost of an asset to the periods in which the asset is used.
D) Charging depreciation expense provides a means of setting aside cash for the replacement of an asset.

Question

Quizplus · Accepted Answer

Charging depreciation expense does not set aside cash for asset replacement; it is a non-cash accounting entry that allocates the cost of an asset over its useful life.

With Respect to the Relationship Between Depreciation and Cash, Which