Depreciation allocates asset costs over useful life

Steps:

• Identify depreciation as a non-cash expense reducing asset value over time.
• Recall its purpose: matching costs to revenue periods under matching principle.
• Evaluate choices: A focuses on cash, B on market value, C on cost allocation, D on timing.
• Select C as it aligns with accounting standards for expense recognition.

Why C is correct:

• Depreciation spreads an asset's cost systematically over its useful life, per IAS 16, ensuring expenses match related revenues.

Why the others are wrong:

• A: Depreciation is non-cash; replacement cash comes from operations or financing.
• B: It shows historical cost less accumulated depreciation, not realisable (market) value.
• D: It estimates wear but doesn't dictate exact replacement timing.

Final answer: C