Question

Which of the following best describe depreciation?
a) Valuation of fixed assets at the end of the year
b) Verification of the assets
c) Decreasing the market value of asset
d) Allocation of cost of fixed asset over its use full life
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Answer 1

Allocation of cost of a fixed asset over its useful life (Option D)

Explanation:

• Firstly, depreciation is the process of allocation, not valuation.
• In simple words, depreciation tells us how much of the asset's value has been used up over its life expectancy.
• It is calculated from the date of starting the commercial usage of the asset.
• The depreciation is charged on reduced value when it comes to WDV method.

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