Which item is the expense representing wear and tear on fixed assets?

Which item is the expense representing wear and tear on fixed assets?

• A. AMORTIZATION EXPENSE
• B. DEPLETION EXPENSE
• C. DEPRECIATION EXPENSE
• D. IMPAIRMENT CHARGE

Answer: (C)

Wear and tear on fixed assets is reflected through depreciation expense, which systematically allocates the asset’s cost over its estimated useful life as it is used. This is a non-cash expense that matches the asset’s consumption in each period. Amortization applies to intangible assets, not tangible fixed assets; depletion is used for natural resources as they’re extracted; impairment is a write-down to reflect a permanent drop in value, not the regular wear from use. For example, a machine bought for 100,000 with a 10-year life would be depreciated over that period, reducing its carrying amount by a portion each year (often evenly in straight-line terms). This shows how depreciation captures wear and tear over time.

Wear and tear on fixed assets is reflected through depreciation expense, which systematically allocates the asset’s cost over its estimated useful life as it is used. This is a non-cash expense that matches the asset’s consumption in each period. Amortization applies to intangible assets, not tangible fixed assets; depletion is used for natural resources as they’re extracted; impairment is a write-down to reflect a permanent drop in value, not the regular wear from use. For example, a machine bought for 100,000 with a 10-year life would be depreciated over that period, reducing its carrying amount by a portion each year (often evenly in straight-line terms). This shows how depreciation captures wear and tear over time.