In financial accounting, depreciation is considered a type of which of the following?

• A. Expense
• B. Current liability
• C. Revenue
• D. Owner withdrawal (dividend)

Answer: (A)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life.
2. Recognize that depreciation represents the usage or wear and tear of an asset, which reduces the asset's book value over time.
3. Identify the nature of depreciation in accounting: since it reflects the cost of using an asset during a period, it is recorded as an expense.
4. Recall the classification of accounts: expenses decrease net income and are reported on the income statement, unlike liabilities, revenues, or owner withdrawals.
5. Conclude that depreciation is classified as an expense because it matches the cost of asset usage to the period in which the asset helps generate revenue.