Question

question 12

non-current assets will decline in value over time due to:

a usage
b sales
c closure
d liquidation

Explanation:

🆕 New Concept Discovered: Asset Depreciation
The gradual loss of value in long-term assets.

Step 1: Understand Non-Current Assets

Non-current assets (also known as fixed assets) are long-term resources owned by a business that are expected to provide economic benefits for more than one year. Examples include machinery, vehicles, buildings, and equipment.

Step 2: Analyze the Cause of Value Decline

Over time, these physical assets lose their value. In accounting, this systematic reduction in value is called depreciation. The primary drivers of depreciation are:

• Wear and tear (Usage): Physical deterioration from using the asset to generate revenue.
• Obsolescence: Becoming outdated due to technological advancements.
• Passage of time: Natural aging of the asset.

Among the given options, Usage directly represents the physical wear and tear that causes an asset's value to decline gradually over its useful life.

Step 3: Evaluate Other Options

• B Sales: Selling an asset removes it from the balance sheet entirely at a specific point in time; it is not a gradual decline in value over time.
• C Closure: Closing a business or department stops operations but is not the direct cause of gradual asset wear.
• D Liquidation: This is the process of selling off all assets quickly to convert them to cash, usually when winding up a business, rather than a gradual decline in value over time.

Answer:

A Usage