A reduction in the value of capital goods over time due to their use in production is called
A) waste of finite resources.
B) erosion.
C) consumption.
D) investment.
E) depreciation.

Question

Quizplus · Accepted Answer

Depreciation refers to the gradual decrease in the value of capital goods over time due to wear and tear, obsolescence or other factors. This decrease is recorded as an expense in the accounting records to reflect the fact that the value of these assets is being consumed in the production process. Depreciation is a normal and necessary part of any business operation that uses fixed assets, and it helps to ensure that the company's financial statements accurately reflect the true cost of producing goods and services.

A Reduction in the Value of Capital Goods Over Time