Most companies make adjusting entries for depreciation because:
A)Their plant assets lose market value over time.
B)The matching concept must be upheld in financial statements.
C)Both their plant assets lose market value over time and the matching concept must be upheld in financial statements.
D)Neither their plant assets lose market value over time nor the matching concept must be upheld in financial statements.

Question

Quizplus · Accepted Answer

The matching concept requires that expenses be matched with revenues in the same accounting period. Depreciation is a way to allocate the cost of a plant asset over its useful life, so it must be recognized as an expense in the same period as the asset contributes to revenue. Adjusting entries for depreciation ensure that the matching concept is upheld in financial statements.

Most Companies Make Adjusting Entries for Depreciation Because