Depreciation is the process of allocating the cost of a plant asset to expense over its useful life. It is not a measure of market value or physical deterioration, and is not applied to land. While depreciation reduces net income on the income statement, it does not result in an outflow of cash.

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Depreciation

Question 72

Multiple Choice

Depreciation:

A) Measures the decline in market value of an asset.
B) Measures physical deterioration of an asset.
C) Is the process of allocating the cost of a plant asset to expense.
D) Is applied to land.
E) Is an outflow of cash from the use of a plant asset.

Correct Answer: