What is the income statement line item for depreciation?

What is the income statement line item for depreciation?

• A. Depreciation expense; non-cash allocation of asset cost over its useful life.
• B. Interest expense; cash outflow.
• C. Amortization of intangible assets; cash-based.
• D. Revenue.

Answer: (A)

Depreciation is the non-cash charge that allocates the cost of tangible fixed assets over their useful lives, and on the income statement it appears as depreciation expense. This line item reduces reported net income without an actual cash outlay in the period, which is why it’s described as a non-cash allocation of asset cost. The other options mix in financing or intangible assets: interest expense is a financing cost and a cash outflow, amortization of intangible assets applies to intangibles (also non-cash but a different category), and revenue is income, not an expense.

Depreciation is the non-cash charge that allocates the cost of tangible fixed assets over their useful lives, and on the income statement it appears as depreciation expense. This line item reduces reported net income without an actual cash outlay in the period, which is why it’s described as a non-cash allocation of asset cost. The other options mix in financing or intangible assets: interest expense is a financing cost and a cash outflow, amortization of intangible assets applies to intangibles (also non-cash but a different category), and revenue is income, not an expense.