Depreciation, as the term is used in accounting, means ___________.

Physical deterioration of a fixed asset

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Decline in the market value of an asset

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Allocation of the cost of fixed asset over its useful life

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A business expense for acquiring asset

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Solution

The correct option is C Allocation of the cost of fixed asset over its useful life
Assets that are used in the business for the long term to earn future economic benefits are termed fixed assets. The cost of such fixed assets is allocated and charged to profit and loss account over the usefulness of the asset which is called depreciation. Such depreciation is a reduction in the value of assets over a period of time due to the wear and tear of the assets.

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Similar questions

___is a method of depreciation, in which the cost of the asset is spread uniformly over the life years by writing off a fixed amount every year, where as in ___ method of depreciation, a fixed rate of depreciation is charged on the book value of the asset over its useful life.

Under which depreciation method the amount of depreciation expense remains same throughout the useful life of a fixed asset?

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