Question

As per __________ Depreciation is an expense incurred in normal course of business.

• A. Matching Concept
• B. Cost concept
• C. Dual aspect
• D. None

Answer 1

The correct option is A Matching Concept

Matching concept.

Depreciation is defined as the expensing of the cost of an asset involved in producing revenues throughout its useful life.

Depreciation and the matching principle

Depreciation expense reduces an accounting period’s income even though the expense does not require a cash or credit payment. The reason for the expense is to comply with the matching principle required by accrual accounting. According to the principle, expenses are recognized regardless of cash payment when obligations are:

1. Incurred (usually when goods are transferred (sold) or services rendered),

2. Generated by expenses involved in the earning of the accounting period’s revenues.