The major purpose of charging depreciation is:
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

Depreciation is the process of allocating the cost of a fixed asset over its useful life. The purpose of charging depreciation is to spread the cost of the asset over its useful life so that the cost of using it up is matched against the income earned. This helps to fairly and accurately distribute the cost of the asset over the period in which it is used, and to ensure that the financial statements reflect the true economic situation of the business. Option A is partially correct, as it provides for the replacement of the asset, but this is not the primary purpose of depreciation. Option C is incorrect, as depreciation does not adjust the asset to its expected market value. Option D is incorrect, as depreciation serves a specific purpose in the accounting process.

The Major Purpose of Charging Depreciation Is