Final answer:
Depreciation must be shown for long-lived tangible assets (other than historical treasures/art) if they are used to generate revenue or have a limited useful life.
Step-by-step explanation:
Depreciation must be shown for long-lived tangible assets (other than historical treasures/art) if they are used to generate revenue or have a limited useful life. Depreciation is the systematic allocation of the cost of an asset over its useful life. By showing depreciation on the financial statements, a company can accurately reflect the decrease in value of its long-lived tangible assets over time.
For example, let's say a company purchases a delivery vehicle for $50,000. The useful life of the vehicle is estimated to be 5 years. The company can allocate $10,000 of depreciation expense each year ($50,000 / 5 years) to account for the wear and tear, obsolescence, and decrease in value of the vehicle. This depreciation expense is reflected on the company's income statement as an operating expense, reducing its net income.