Final answer:
The purpose of depreciation is not to report the current value of an asset on the balance sheet, but to allocate the cost of a tangible asset over its useful life by the matching principle.
Step-by-step explanation:
The statement that the purpose of depreciation is to have the balance sheet report the current value of an asset is false. Depreciation is an accounting method that allocates the cost of a tangible asset over its useful life. It does not necessarily reflect the current market value of an asset. The main purpose of depreciation is to match the expense of using the asset with the revenues that the asset helps generate, following the matching principle in accounting.
For example, if a company purchases a piece of machinery for $100,000 and it is expected to last for 10 years, the company might use straight-line depreciation and depreciate the asset by $10,000 per year. This doesn't mean that after one year the machinery is only worth $90,000 in the market; it merely reflects that the company has allocated part of the asset's initial cost against the revenues it helped to generate during that year.