Which of the following statements most appropriately describes the purpose of depreciating 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

Think of the cost of a long-lived asset as a big prepayment for future benefits.As that asset is used,those prepaid benefits are used up,so the asset needs to be decreased each period.This decrease in the asset creates an expense,which is reported on the income statement and matched against the revenue generated by the asset,as required by accrual accounting.

Which of the Following Statements Most Appropriately Describes the Purpose