Recording depreciation is an application of the:
A)expense recognition principle ("matching").
B)cost principle.
C)separate entity assumption.
D)unit-of-measure assumption.

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.

Recording Depreciation Is an Application of The