Question

Depreciation is assumed to be a function of ______ rather than the passage of time.

1) Productivity
2) Time
3) Both productivity and time
4) None of the above

Answer 1

Depreciation is typically seen as a function of time, reflecting how capital assets diminish in value over their lifespan. While productivity can affect the rate of asset usage, standard accounting practices focus on time-based depreciation. Option 2 is correct.

Step-by-step explanation:

Depreciation is assumed to be a function of time rather than productivity. This concept is key in accounting and finance, and it refers to the process by which capital assets lose value over time. It is a non-cash expense that businesses use to allocate the cost of an asset over its useful life. In some cases, productivity measures, such as GDP per capita or productivity growth, may indirectly factor into how depreciation is calculated, especially when it comes to assets whose wear and tear are closely tied to production volume. However, in the context of the question, depreciation is typically recognized as a function of time, aligning with the second option listed in your question.