Which statement about depreciation is accurate?

The statement that depreciation is a non-cash expense that reduces taxable income is accurate because depreciation represents the allocation of the cost of a tangible asset over its useful life. While it does not involve any cash outflow during the accounting period when recorded, it serves to reduce the reported net income on the financial statements. Since taxable income is derived from net income, applying depreciation lowers taxable income, which in turn decreases the amount of taxes owed. This accounting practice allows businesses to better match their expenses with the revenues generated from the use of those assets over time, reflecting a more accurate financial position.

While depreciation is important for financial reporting and tax purposes, it does not directly impact cash flow because it is a non-cash expense, which means it doesn't change the cash balance during the period it is recorded. Similarly, depreciation does not increase the asset's value; in fact, it reduces the book value of the asset as it is expensed over time. Additionally, depreciation is not optional under tax laws; rather, it is a required practice for most businesses to account for the decrease in value of their fixed assets.