Matching part of the cost of a long-lived asset with the revenues generated by the asset is:
A)a basket purchase.
B)not required by GAAP.
C)not required by IFRS.
D)depreciation.

Question

Quizplus · Accepted Answer

Depreciation is the allocation of existing costs that were already recorded as a long-lived asset.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 GAAP.

Matching Part of the Cost of a Long-Lived Asset with the Revenues