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Q3Q

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Intermediate Accounting (Kieso)
Found in: Page 582

Short Answer

Some believe that accounting depreciation measures the decline in the value of fixed assets. Do you agree? Explain.

Answer

I disagree with the statement.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Depreciation

Depreciation is an annual indirect and explicit expense imposed by a corporation when it utilizes a fixed asset like equipment, machinery, or pricey tools. Essentially, it refers to the decrease in the value of a tangible asset.

Step 2: Explaining the statement 

Disagree. Accounting depreciation is the practice of assigning the cost of tangible assets to expenses in a systematic and sensible manner to the periods in which the asset is expected to be used. As a result, depreciation is a cost-allocation tool rather than a valuation tool.

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