Question

Which of the following statements about depreciation is correct? When depreciation expense is incurred, cash balances are reduced. Depreciation reduces the book value of assets. Depreciation expense does not affect net income. Depreciation is subtracted from cost of goods sold to calculate net income.

Answer 1

Answer:

The correct answer is letter "B": Depreciation reduces the book value of assets .

Explanation:

Depreciation shows how much and the value of the assets was used up. This also aims to balance an asset's cost to the revenue that the asset has helped the business gain. Used as an income tax deduction, depreciation calculations offer businesses an annual allowance for the use and deterioration of tangible (physical) assets.

Depreciation reduces the book value of assets because, after the depreciation calculation is done, the amount computed decreases the current value of the asset it represents.