What is the purpose of depreciation in accounting?
What is the purpose of depreciation in accounting?
To allocate the cost of an asset over its useful life.
To record the revenue earned from providing goods or services.
To record the decrease in the value of an asset over time.
To measure the profitability of a company.
3 answers
Depreciation in accounting serves the purpose of allocating the cost of an asset over its useful life, rather than allocating the entire cost in the year the asset was purchased. This helps to match the expense of the asset with the revenue it generates, resulting in a more accurate representation of the company's financial performance. Depreciation also helps to record the decrease in the value of an asset over time, providing a more realistic valuation of the company's assets on the balance sheet. Additionally, depreciation is important for measuring the profitability of a company by accurately reflecting the true costs of using and maintaining assets in the production of goods or services.
answer from the responses
To allocate the cost of an asset over its useful life.
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