Depreciation is the allocation of a past cost. The following myths about depreciation are false. Depreciation provides funds for the eventual replacement of the asset. It is an allocation of the original cost. Depreciation is a non-cash expense.
Depreciation records the fall in market value of the asset.
Depreciation records the physical deterioration of the asset. The scrap value of the asset when it is disposed Items 2 and 3 are events to occur in the future. Therefore, it is impossible to measure depreciation. Accounting reports past and present events only. Most accounting texts only show the recording of the net proceeds.