Accounting for IGCSE & O level - Accounting Procedures (Section 11 - No. 47)
What is the primary purpose of accounting for depreciation?
To accurately reflect the cost of an asset over its useful life
To reduce taxable income
To match the cost of an asset to the revenue it generates
All of the above
Explanation
All the answers are correct. Depreciation is an expense and should be included in the income statement for the accounting period the asset is being used. It also impacts the tax liability for the business. The primary purpose of depreciation is to match the cost of the asset to the revenue it generates, but it impacts the other two options as well.
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