Which term denotes a decrease in the value of an asset over time?

Which term denotes a decrease in the value of an asset over time?

• A. deprecation
• B. amortization
• C. impairment
• D. depreciation

Answer: (D)

Depreciation reflects the gradual loss of value of a tangible asset as it ages, wears, and becomes less efficient or obsolete. It represents spreading the asset’s cost over its useful life and is recorded as an expense, even though cash outlays may have occurred when the asset was purchased. This concept differs from amortization, which applies to intangible assets, and from impairment, which is a sudden, often external, drop in value that is not tied to the asset’s ongoing use. The term deprecation is a common misspelling or混, but the correct term for a gradual decline in value over time is depreciation.

Depreciation reflects the gradual loss of value of a tangible asset as it ages, wears, and becomes less efficient or obsolete. It represents spreading the asset’s cost over its useful life and is recorded as an expense, even though cash outlays may have occurred when the asset was purchased. This concept differs from amortization, which applies to intangible assets, and from impairment, which is a sudden, often external, drop in value that is not tied to the asset’s ongoing use. The term deprecation is a common misspelling or混, but the correct term for a gradual decline in value over time is depreciation.