Final answer:
Depreciation and amortization are accounting practices that allocate the cost of long-term tangible and intangible assets over their useful lives, and the statement is true.
Step-by-step explanation:
Depreciation and amortization indeed allocate the cost of long-term assets to the periods which benefit from their use. This statement is true. Depreciation refers to tangible assets such as buildings, machinery, and equipment, spreading their cost over their useful life.
Amortization, on the other hand, is used for intangible assets like patents or software, also distributing their cost over their useful life or the legal period of their protection, whichever is shorter. Both are non-cash expenses that impact a company's income statement by reducing reported earnings while they might not involve an actual cash outflow during the period.
Depreciation and amortization are accounting methods used to allocate the cost of long-term assets to the periods in which they are used or consumed. Depreciation is used for tangible assets, such as buildings and machinery, while amortization is used for intangible assets, such as patents and copyrights.
For example, let's say a company purchases a machine for $10,000 that has a useful life of 5 years. The company can choose to allocate the cost of the machine evenly over the 5-year period, resulting in an annual depreciation expense of $2,000.