Depreciation Concepts and Types Quiz

Depreciation is the decrease in the value of physical property due to physical or economic reasons. Physical property shall include both tangible and intangible business property with the exception of real estate. Tangible – may be seen or touched (furniture, machinery, office equipment, etc.) Intangible – includes copyright , franchise, or ______.

Physical Depreciation results in the decrease in the ability of a physical property to perform its intended service which is caused by corrosion, abrasion, decay, impact, heat, stress, and ______.

Functional Depreciation results from obsolescence or inadequacy of the property to meet the demand required, which occurs when new and better equipment is available that is more efficient and less expensive to ______.

Terminologies Value - Is the measure of the worth that an individual ascribes to a property or service. Market Value - Is the amount that a willing buyer pays a willing seller for the purchase of his property, where neither buyer nor seller is compelled to buy or ______.

To enable the cost of depreciation to be charged to the cost of manufacturing products or services rendered. ______