The percentage of value of an asset subtracted each year until the value becomes zero, to reflect wear and tear on the asset, is called ________.
A) depreciation
B) inventory
C) deductible
D) reduction

Question

Quizplus · Accepted Answer

The definition provided fits the concept of depreciation, which is a method used for accounting purposes to allocate the cost of a tangible asset over its useful life, with the objective of matching the cost of the asset to the revenues that it generates. This allocation is typically based on a formula that considers the original cost of the asset, the estimated salvage value, and the estimated useful life, among other factors. Depreciation is not the same as a reduction, which could refer to any decrease in value, nor is it related to inventory, which is the stock of goods that a business holds to sell to customers. A deductible, on the other hand, is an expense that can be subtracted from taxable income to reduce the amount of taxes owed. While depreciation can have a tax benefit, it is not necessarily a deductible expense in all cases.

The Percentage of Value of an Asset Subtracted Each Year