For most property, plant, and equipment, depreciation is caused by which of the following:

Question

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Depreciation is caused by obsolescence, or the wear and tear of the asset over time. Option A (the process of valuation) refers to determining the initial value of the asset and does not impact depreciation. Option C (changes in fair value) refers to an increase or decrease in the value of the asset, but does not directly cause depreciation. Option D (setting aside cash to replace assets as they wear out) is more related to the accounting treatment of depreciation rather than the actual cause.

For Most Property, Plant, and Equipment, Depreciation Is Caused by Which