What is the major purpose of depreciation?
A)To provide for the replacement of the asset
B)To spread the cost of the asset over its useful life, so that the cost of using it up is matched against income earned
C)To adjust the asset to its expected market value
D)None of the above

Question

Quizplus · Accepted Answer

The major purpose of depreciation is to spread the cost of the asset over its useful life, so that the cost of using it up is matched against income earned. This helps in accurately determining the net income of a business during the accounting period.

Answer: D 
 None of the other options accurately describes the major purpose of depreciation. Depreciation is not solely for providing for the replacement of the asset, nor is it for adjusting the asset to its expected market value.

What Is the Major Purpose of Depreciation