Depreciation is a process of asset valuation, not cost allocation.
Depreciation provides for the proper matching of expenses with revenues.
The book value of a plant asset should approximate its fair value.
Depreciation applies to three classes of plant assets: land, buildings, and equipment.
Depreciation does not apply to a building because its usefulness and revenueproducing ability generally
remain intact over time.
The revenueproducing ability of a depreciable asset will decline due to wear and tear and to obsolescence.
Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset.
The balance in accumulated depreciation represents the total cost that has been charged to expense since
placing the asset in service.
Depreciation expense and accumulated depreciation are reported on the income statement.
Three factors affect the computation of depreciation: cost, useful life, and salvage value.
