Question

Long-term assets are depreciated over time for which reason?

Answer 1

Inflation

Explanation:

The rising costs of goods and services mean that $1 in 2022 will be worth more than $1 in 2032. This is called inflation.

Let's just say you put $200,000 in a savings account in 2000. That could've purchased you a 4 bedroom house at the time.

You keep the money in the account for over 20 years. And in 2020, you want to buy a new home with the money you have saved.

However, you can only buy a 2 bedroom house, because the rising costs of the market, increased the cost, or depreciated your savings.

This is called inflation.

Answer 2

Explanation:

Depreciation of Long Term Assets

As with most types of assets, long term assets needs to be depreciated over the course of their useful life. It is because a long term asset is not expected to generate a benefit for an infinite amount of time.