Depreciation in Accounting Quiz
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Questions and Answers

What is depreciation in accounting?

  • The process of recording profits from asset sales
  • The allocation of the cost of an asset over its useful life (correct)
  • The increase in value of an asset over time
  • The process of selling off assets to reduce liabilities

    • Which method of depreciation assumes an equal reduction in the asset's value each year of its useful life?

  • Sum-of-the-years'-digits depreciation
  • Double-declining balance depreciation
  • Units of production depreciation
  • Straight-line depreciation (correct)

    • How does depreciation affect the financial statements?

  • It increases the value of assets on the balance sheet and increases net income on the income statement
  • It reduces the value of assets on the balance sheet and decreases net income on the income statement (correct)
  • It has no impact on the balance sheet but decreases net income on the income statement
  • It has no impact on the income statement but decreases the value of assets on the balance sheet

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