Which statement describes depreciation?

The correct statement regarding depreciation is that it describes the process of allocating the cost of an asset throughout its useful life. This means that instead of recording the entire expense of an asset at the time of purchase, depreciation allows for the gradual recognition of that cost over a period of time. This approach reflects the usage and wear-and-tear of the asset as it contributes to the generation of revenue, providing a more accurate representation of a company's financial position and performance.

Depreciation is critical for accounting purposes as it aligns the cost of the asset with the income it helps to generate, adhering to the matching principle in accounting. This method also aids in tax calculation, as businesses can deduct depreciation expenses from their taxable income, thereby reducing their tax liabilities over its useful life.

The other statements do not accurately capture the essence of depreciation. For instance, increasing asset value over time does not describe depreciation, as this process typically results in a decreased book value. A one-time expense at acquisition contradicts the fundamental concept of depreciation, as it involves recognizing the cost over time rather than all at once. Additionally, while depreciation is primarily associated with tangible assets, it can also relate to intangible assets, making the assertion that it is only applicable to tangible assets incomplete.