Depreciation:
A) Measures the decline in market value of an asset.
B) Measures physical deterioration of an asset.
C) Is the process of allocating to expense the cost of an item of property, plant and equipment.
D) Is an outflow of cash from the use of an item of property, plant and equipment.
E) Is applied to land.

Question

Quizplus · Accepted Answer

Depreciation is the process of allocating to expense the cost of an item of property, plant and equipment over its useful life. Option A is incorrect because it measures the decline in the book value of an asset, not the market value. Option B is incorrect because it refers to physical wear and tear, which is separate from depreciation. Option D is incorrect because it refers to the use of an asset, which may or may not result in depreciation. Option E is incorrect because land is not subject to depreciation.