How can Depreciation be presented on the Income Statement?

How can Depreciation be presented on the Income Statement?

• A. It is always shown as a separate line item.
• B. It could be shown as a separate line item or embedded in Cost of Goods Sold or Operating Expenses.
• C. It is never shown on the Income Statement.
• D. It increases revenue.

Answer: (B)

Depreciation is an expense that allocates the cost of tangible assets over their useful lives and reduces income on the income statement. Its presentation can vary: it may be shown as a separate line item, or it can be embedded within the cost of goods sold or within operating expenses, depending on how the company groups costs and the asset’s role in operations. Both presentations are acceptable as long as the total depreciation expense is clearly disclosed and kept consistent. It is not a revenue item, and it is not never shown on the income statement, so the option that depreciation could be a separate line item or embedded in COGS or Operating Expenses best captures how it can appear.

Depreciation is an expense that allocates the cost of tangible assets over their useful lives and reduces income on the income statement. Its presentation can vary: it may be shown as a separate line item, or it can be embedded within the cost of goods sold or within operating expenses, depending on how the company groups costs and the asset’s role in operations. Both presentations are acceptable as long as the total depreciation expense is clearly disclosed and kept consistent. It is not a revenue item, and it is not never shown on the income statement, so the option that depreciation could be a separate line item or embedded in COGS or Operating Expenses best captures how it can appear.