If a construction company buys a new car for general use by the sales staff, to which account would the depreciation of the car be charged?

If a construction company buys a new car for general use by the sales staff, to which account would the depreciation of the car be charged?

• A. Cost Of Goods Sold
• B. General And Administrative Costs
• C. Selling Expenses
• D. Advertising

Answer: (B)

Depreciation is classified by how the asset is used to support the business. A car bought for general use by the sales staff provides broad, ongoing support to the company rather than being tied to producing goods or to a specific selling campaign. Because it serves as a general overhead asset that supports the organization as a whole, its depreciation is recorded as General And Administrative Costs. If the vehicle were used in direct, identifiable selling activities tied to particular sales or advertising campaigns, then depreciation might be classified differently (as a Selling Expense or Advertising). But for general use by the sales team, the appropriate category is G&A.

Depreciation is classified by how the asset is used to support the business. A car bought for general use by the sales staff provides broad, ongoing support to the company rather than being tied to producing goods or to a specific selling campaign. Because it serves as a general overhead asset that supports the organization as a whole, its depreciation is recorded as General And Administrative Costs.

If the vehicle were used in direct, identifiable selling activities tied to particular sales or advertising campaigns, then depreciation might be classified differently (as a Selling Expense or Advertising). But for general use by the sales team, the appropriate category is G&A.