Multiple choice

Depreciation arises because of

  1. fall in the market value of the asset.

  2. fall in the value of money.

  3. physical wear and tear of the asset.

  4. none of these.

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Depreciation is systematic allocation of asset cost over useful life due to wear/tear, not market fluctuation. Physical wear and tear (usage, aging) is primary cause. Fall in market value is irrelevant to depreciation calculation. Fall in money value affects inflation accounting, not depreciation. None of these is incorrect since C is correct.