The purpose of recording depreciation on a productive assets is to:
A) reflect the decline in the fair value of the assets each period.
B) reduce income when the company has an exceptionally profitable year.
C) be in conformity with the revenue recognition principle.
D) allocate the original cost of a productive asset to expense over its useful life.

Question

Quizplus · Accepted Answer

The purpose of recording depreciation on a productive asset is to allocate the original cost of the asset to expense over its useful life. This allows for a more accurate reflection of the asset's decreasing value over time and helps to match expenses with revenues in accordance with accrual accounting principles. Option A is not correct because depreciation does not reflect fair value. Option B is incorrect because depreciation is not used to reduce income during profitable years. Option C is incorrect because the purpose of depreciation is not related to the revenue recognition principle.

The Purpose of Recording Depreciation on a Productive Assets Is