Question

Which of the following is not true of depreciation accounting?(a)Depreciation lowers the book value of the asset as it ages and its fair value declines.(b)Depreciation matches expenses against revenues over the periods which benefit from the asset's use.(c)Depreciation is a process of cost allocation.(d)Tangible assets with limited lives are depreciated.

Answer 1

Answer: Option A

Explanation:

A. Depreciation lowers the book value but not fair value of the asset.

B. Depreciation is the method of allocating expense of the asset and to calculate the return as per that expenditure hence it matches revenue with expense .

C. Depreciation is the method of allocating cost of the asset over its useful life.

D. Depreciation can only be calculated on tangible assets with useful life,for other assets process of amortization is used.