Depreciation – True or False

Practice Question

Intro to Financial Accounting
Long-Lived Assets
Depreciation Methods
True or False

Depreciation expense reduces the carrying amount of an asset over its useful life.

Answer +
Correct Answer: TRUE
Explanation +

Depreciation systematically allocates the cost of a tangible long-lived asset over its useful life. As depreciation is recorded over time, the asset’s book value on the balance sheet is reduced to reflect its consumption or usage.

This process helps ensure that the financial statements accurately represent the asset's current value and provides a more realistic view of the company’s financial position.