Depreciation Matches Asset Costs to Revenues

Steps:

• Depreciation allocates the cost of non-current assets over their useful life.
• This spreads the expense to periods benefiting from the asset's use.
• The matching principle requires expenses to align with related revenues in financial statements.
• Option C directly reflects this core accounting principle.

Why the correct option is correct:

• Depreciation applies the matching principle by charging asset costs against revenues generated over the asset's life, as defined in accrual accounting standards.

Why the others are wrong:

• A: Depreciation distributes costs across years, not concentrates them in the purchase year.
• B: Book value results from depreciation but is not its primary purpose.
• D: Depreciation is non-cash and aids cash retention indirectly, but the goal is expense matching, not cash management.

Final answer: C