Depreciation allocates asset costs systematically

Steps:

• Recall depreciation as an accounting method for fixed assets.
• Evaluate each option against the standard definition from accounting principles.
• Identify the option matching cost allocation over useful life.
• Eliminate options describing value change, cash flow, or direct expense.

Why A is correct:

• Per IAS 16, depreciation systematically allocates the depreciable amount of an asset over its useful life to match expenses with revenue generation.

Why the others are wrong:

• B: Measures market value decline, not accounting allocation.
• C: Depreciation is non-cash; it does not represent actual outflows.
• D: Refers to initial purchase cost, not ongoing expense allocation.

Final answer: A