Read the given below two statements and mark the correct answer.
Assertion (A): Depreciation is a non-cash operating expense.
Reason (R) : Depreciation is increase in the value of a tangible fixed asset.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Assertion (A) is true but Reason (R) is False.
Assertion (A): Depreciation is a non-cash operating expense. THIS IS TRUE. Depreciation is a non-cash expense. It does not involve any cash outflow. It is the process of writing-off the capital expenditure already incurred.
Reason (R) : Depreciation is increase in the value of a tangible fixed asset. THIS IS FALSE. Depreciation is decline in the value of a tangible fixed asset not increase it. Depreciation is decline in the value of a tangible fixed asset. In accounting, depreciation is the process of allocating depreciable cost over useful life of a fixed asset.
Thus, the correct answer is Assertion (A) is true but Reason (R) is False.