Depreciation is necessary because most noncurrent assets have a limited useful life; the difference between the asset and depreciation is intended to provide a more realistic picture of the retailer's assets and prevent an overstatement or understatement of these assets.

Question

Quizplus · Accepted Answer

Depreciation is necessary because noncurrent assets, such as buildings or equipment, have a limited useful life and their value decreases over time. By subtracting the accumulated depreciation from the original cost of the asset, a more accurate and realistic picture of the asset's value can be obtained. This prevents an overstatement or understatement of the retailer's assets on the balance sheet.

Depreciation Is Necessary Because Most Noncurrent Assets Have a Limited