Allocating the cost of a fixed asset over its useful life is called __________.

amortization

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depreciation

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obsolescence

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disposal

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Solution

The correct option is A depreciation
Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. Principle factor in measurement of depreciation are total cost of asset, useful life of the asset, residual value of the asset. In other words a reduction in the value of asset over time, due to particular to wear and tear.

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