The purpose of depreciation is to allocate the asset's cost systematically and rationally over the life of the asset to ensure that the company has adequate capital for future replacement.

Question

Quizplus · Accepted Answer

The purpose of depreciation is to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence, not to ensure capital for future replacement.

The Purpose of Depreciation Is to Allocate the Asset's Cost