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Chapter 17. Managing Assets > Why Do We Have to Use Depreciation?

Why Do We Have to Use Depreciation?

The purpose of using depreciation accounts to report the expense of the cost of assets is to match the cost of the asset with the income it produces.

If an asset is expected to function and produce income for several years before it becomes outdated or no longer works properly, spreading the cost of the asset over a similar period of time seems reasonable. Deducting the cost of the asset all in one year distorts the process of matching income with expenses.


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