Question

Depreciation: Multiple Choice

1. is the reduction in business inventories per year.
2. represents a firm's expenditure to add to its capital stock.
3. is the decline in the value of a firm's stock.
4. estimates the decrease in value of capital goods due to wear and tear over the year.

Answer 1

4. Estimates the decrease in the value of capital goods due to wear and tear over the year.

Step-by-step explanation:

In accounting terms and in the business world, depreciation is defined as the systematic loss or reduction in value of a fixed asset or capital goods over time due to wear and tear. It is used in estimating the useful life or life expectancy of the asset. Examples of those fixed assets include, buildings, furniture, tractors, etc.