Depreciation is the allocation of a plant asset's cost to expense over its useful life, which reflects the decline in value due to wear and tear, obsolescence, or other factors. It is not the same as setting aside cash for replacement (B) or a process of valuation (A), and it can apply to assets that are depreciating or appreciating in value, as it is based on the cost of the asset, not its market value.

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Depreciation Is

Question 47

Multiple Choice

Depreciation is:

A) a process of valuation.
B) the setting aside of cash to replace assets as they wear out.
C) the allocation of a plant asset's cost to expense over its life.
D) not calculated for assets that are appreciating in value.

Correct Answer: