What does depreciation expense represent in accounting?

Depreciation expense represents the portion of a non-current asset's cost that has been allocated to the current reporting period. It reflects the usage and wear and tear of the asset as it contributes to the business's operations. By recognizing depreciation expense, a business is able to match the cost of the asset with the revenue it generates over time, adhering to the matching principle in accounting.

This method provides a more accurate picture of the company's financial health, as it accounts for the consumption of the asset's value rather than recognizing the entire cost upfront. Each reporting period, a portion of the asset's cost is expensed, thus systematically reducing the asset's book value on the balance sheet while simultaneously impacting the income statement through depreciation expense.

In contrast, the other options relate to different aspects of non-current assets. Total cost refers to the full initial purchase price and acquisition costs, while residual value represents the estimated salvage value at the end of the asset's useful life. Total accumulated value typically indicates the sum of depreciation expenses for the asset over time, not specifically the current period's expense.