Decreasing value in tangible assets due to the normal wear and tear is known as ________________.
Last updated Jun 24, 2026
Correct Answer:
Option D —
depreciation
In accounting, depreciation is the systematic process of allocating the cost of a tangible asset over its useful life. It reflects how much of an asset's value has been "used up" due to physical wear and tear, age, or obsolescence.
Why the other options don't fit:
A) Expense: While depreciation is recorded as an expense, "expense" is a broad category for all costs of doing business (like rent or utilities), not a specific term for asset wear and tear.
B) Amortization: This is the equivalent of depreciation but for intangible assets (like patents, trademarks, or copyrights) rather than physical ones.
C) Reserve: A reserve is an amount of profit set aside for a specific purpose (like future investments or unexpected costs), not a measure of asset decline.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
