What happens to the value of a depreciable asset over time?

• A. Decreases over time
• B. Increases over time
• C. Stays the same
• D. Fluctuates unpredictably

Answer: (A)

Depreciation reduces the book value of a depreciable asset over its useful life. As the asset gets used and ages, wear and obsolescence mean it contributes less to operations, so accounting spreads that cost over the years it’s expected to help generate revenue. Each period you record depreciation, which lowers the asset’s carrying amount on the balance sheet. For example, a 30,000 asset with a five-year life would typically have its book value reduced each year by the depreciation expense, until it reflects its salvage value at the end of life. The other options don’t match this pattern: value isn’t normally recorded as increasing with time, nor staying the same, nor fluctuating unpredictably for a standard depreciable asset.