A contractor buys a major tool that will be used for several years. Which concept best matches spreading its cost over useful life?
Correct Answer
A) Depreciation.
Depreciation allocates the cost of a long-lived asset over its useful life.
Why This Is the Correct Answer
Depreciation allocates the cost of a long-lived asset over its useful life.
Why the Other Options Are Wrong
Option B: Owner draw.
Owner draw. puts the item in the wrong financial bucket, timing, base, or comparison for depreciation concept.
Option C: Accounts receivable.
Accounts receivable. puts the item in the wrong financial bucket, timing, base, or comparison for depreciation concept.
Option D: Retainage.
Retainage. puts the item in the wrong financial bucket, timing, base, or comparison for depreciation concept.
Memory Technique
Controlling and allocates point to different ledger roads for Classifying Equipment.
Reference Hint
Study anchor (closed-book): memorize asset cost allocation from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
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