Which statement about the relationship between asset cost and revenue is true regarding depreciation?

The chosen statement accurately reflects a fundamental principle in accounting known as the matching principle. This principle posits that revenues earned in a period should be matched with the expenses incurred to generate those revenues within the same period.

Depreciation represents the allocation of the cost of a tangible asset over its useful life. As an asset, its cost is not expensed fully at the time of purchase; instead, it is systematically allocated over the years or useful life of that asset. This allocation allows businesses to appropriately recognize the expense related to the asset in each accounting period, based on the revenue it generates. Thus, by spreading out the cost of the asset, businesses can align their expenses with the revenue produced during the same time frame, providing a clearer picture of profitability and financial performance.

This systematic expense recognition helps in accurately relating how much of the asset's cost is associated with the revenues earned in each period, facilitating better financial analysis and reporting. It emphasizes the relationship between costs and revenues, ensuring that financial statements reflect a more precise economic reality.

The other statements do not align with the principles of accounting effectively. The notion that depreciation has no effect on revenue ignores the importance of expense recognition. Claiming that revenues do not need to match any costs overlooks the critical