Depreciation is generated due toGroup of answer choicesIncrease in the value of liabilityWear and tearDecrease in capitalDecrease in the value of assets
Question
Depreciation is generated due toGroup of answer choicesIncrease in the value of liabilityWear and tearDecrease in capitalDecrease in the value of assets
Solution
Depreciation is generated due to the wear and tear of assets.
Here's a step-by-step explanation:
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Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy.
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It is an estimate of the reduction in value incurred by owning and using an asset over a period of time.
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This reduction in value is primarily due to factors like wear and tear. For example, a vehicle will depreciate over time due to usage, wear and tear, and obsolescence.
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Therefore, the correct answer to your question is "Wear and tear".
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It's important to note that depreciation does not directly affect cash flow, but it does reduce the value of an asset on the balance sheet.
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Depreciation is not related to an increase in the value of liability or a decrease in capital. It is a decrease in the value of assets, but it's specifically due to wear and tear, not just any decrease.
Similar Questions
Depreciation is the process of allocating the costs of the assets over their expected useful life. True False
Total depreciation expense over an asset's useful life will be identical under all methods of depreciationGroup of answer choicesTrueFalse
Depreciation for a profitable firm:Group of answer choicesincreases the net fixed assets as shown on the balance sheet.reduces both the net fixed assets and the costs of a firm.decreases net income by less than $1 for every $1 of depreciation expense.decreases net fixed assets, net income, and operating cash flows.is a non-cash expense which increases the net operating income.
Depreciation of the business is recorded in which of the following financial statement
Depreciation is an accounting method used to:a.Calculate the net profit of a companyb.Determine the market value of assetsc.Allocate the cost of an asset over its useful lifed.Calculate the total liabilities of a company
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