Certified Energy Manager Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Certified Energy Manager Exam with flashcards and multiple choice questions, complete with hints and explanations. Enhance your knowledge and get exam ready with our tailored content!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is depreciation in the context of accounting?

Assets that increase in value over time
Assets that decrease in value over time
The process of selling off assets for profit
The procedure of accounting for liquid assets

The correct answer is: Assets that decrease in value over time

Depreciation in the context of accounting refers to the gradual reduction in the value of an asset over time due to wear and tear, aging, or obsolescence. This concept is essential for businesses as it allows them to allocate the cost of tangible assets over their useful lives. The method helps reflect the decrease in value in the financial statements, ensuring that profits are accurately reported by matching expenses with revenues generated by those assets. Thus, by recognizing that assets decrease in value over time, businesses can make informed decisions about asset management, budgeting, and financial reporting. Understanding this principle is crucial for effective financial analysis and planning within any organization.