Which of the following statements about depreciation is true?
A)Depreciation is the allocation of the cost of equipment to expense.
B)Depreciation represents the reduction in the market value of the asset.
C)Depreciation is the cash paid each month to use a piece of equipment.
D)Depreciation is the same under both cash-based and accrual-based accounting.

Question

Quizplus · Accepted Answer

Depreciation is the process of allocating the cost of a long-term asset (such as equipment) over its useful life. This allocation is recognized as an expense on the income statement. Depreciation is not related to changes in the market value of the asset, and it is not a cash payment. Depreciation can be calculated differently under cash-based and accrual-based accounting, with accrual-based accounting typically providing more accurate and consistent calculations.

Which of the Following Statements About Depreciation Is True