Which statement best describes the nature of depreciation?

Question

Quizplus · Accepted Answer

Depreciation is the allocation of the cost of an asset over its useful life. This is done in order to match the cost of the asset with the revenue it generates over its useful life.

All other options are not accurate descriptions of the nature of depreciation. Option A describes mark-to-market accounting, not depreciation. Option B describes amortization, not depreciation. Option D describes a reserve for replacement, which is a separate accounting concept, not depreciation.

Which Statement Best Describes the Nature of Depreciation