Which of the following statements about depreciation is FALSE?
A) Depreciation does not generate cash.
B) Depreciation is an allocation of the original cost of an asset to the periods in which the asset is used.
C) Depreciation does not entail an outflow of cash.
D) Depreciation is a means of setting aside cash for the replacement of an asset.

Question

Quizplus · Accepted Answer

Depreciation is not a means of setting aside cash for the replacement of an asset. Depreciation is simply a way of allocating the cost of an asset over its useful life, and does not involve setting aside cash for its replacement.

Which of the Following Statements About Depreciation Is FALSE