Question

Which of the following statements related to depreciation is true?

a) It increases the book value of an asset.
b) It represents an allocation of the asset's market value.
c) It is a non-cash expense.
d) It is not considered in financial statements.

Answer 1

Depreciation is a non-cash expense that represents the systematic allocation of an asset's cost over time.

Step-by-step explanation:

The correct statement related to depreciation is option c) It is a non-cash expense.

Depreciation is the systematic allocation of the cost of an asset over its useful life. It is recorded as an expense in the financial statements to reflect the wear and tear or obsolescence of the asset over time.

Depreciation does not involve an increase in the book value of an asset (option a), nor does it represent an allocation of the asset's market value (option b). Finally, depreciation is considered in financial statements as an operating expense.