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What is the primary purpose of depreciation?
What is the primary purpose of depreciation?
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Practice Questions
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Q1
What is the primary purpose of depreciation?
To increase asset value.
To allocate the cost of an asset over its useful life.
To reduce taxable income.
To record asset sales.
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Depreciation allocates the cost of a tangible asset over its useful life, reflecting its usage and wear over time.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the primary purpose of depreciation?
Solution:
Depreciation allocates the cost of a tangible asset over its useful life, reflecting its usage and wear over time.
Steps: 4
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Step 1: Understand that depreciation is a way to spread out the cost of a physical item (like a machine or a car) over the time you use it.
Step 2: Recognize that every time you use the item, it gets a little older and less valuable.
Step 3: Realize that depreciation helps businesses show how much of the item's value has been used up each year.
Step 4: Know that this process helps in accounting and tax calculations, making it clear how much the item is worth as time goes on.
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