How can accounting depreciation be defined?

Accounting depreciation is fundamentally defined as cost allocation. This concept refers to the systematic allocation of the cost of tangible fixed assets over their useful lives. It recognizes the wear and tear, deterioration, or obsolescence of an asset as it is used in operations, thereby providing a matching of expenses with revenues in the financial statements.

This approach helps businesses reflect the true value of their assets over time and ensures that financial reporting is accurate and compliant with accounting principles. By allocating the initial cost of the asset over time, companies can better understand the actual expense associated with asset usage, which is crucial for budgeting and financial analysis.

While the other options touch on related financial concepts, they do not accurately describe accounting depreciation. Tax liability reduction may occur as a result of recognizing depreciation, but it is not the definition of depreciation itself. Market adjustment refers to changes in an asset's market value, which is separate from depreciation as it focuses on cost allocation rather than market fluctuations. Asset revaluation involves adjusting the carrying amount of an asset to reflect its fair market value, which is distinct from the periodic cost allocation process inherent in depreciation.