Depreciation describes a decrease in value due to physical deterioration, functional obsolescence, or economic obsolescence.

Depreciation describes a decrease in value due to physical deterioration, functional obsolescence, or economic obsolescence.

• A. Physical deterioration
• B. Physical deterioration and functional obsolescence
• C. Market appreciation
• D. Inflation

Answer: (B)

Depreciation means a loss in value caused by factors that reduce a property's usefulness or desirability over time. The main drivers are physical deterioration from wear and tear and functional obsolescence when the property's design or features no longer meet market needs. External economic factors can also cause depreciation, but when comparing the options, the combination of physical deterioration and functional obsolescence best matches the described idea of depreciation. Market appreciation would increase value, and inflation reflects a general rise in prices rather than a specific decline in a particular property’s value.

Depreciation means a loss in value caused by factors that reduce a property's usefulness or desirability over time. The main drivers are physical deterioration from wear and tear and functional obsolescence when the property's design or features no longer meet market needs. External economic factors can also cause depreciation, but when comparing the options, the combination of physical deterioration and functional obsolescence best matches the described idea of depreciation. Market appreciation would increase value, and inflation reflects a general rise in prices rather than a specific decline in a particular property’s value.