California Real Estate Practice Exam

The statement that accountants and appraisers view depreciation of real property differently highlights the distinction between book depreciation and actual depreciation. Accountants focus on book depreciation, which is a systematic reduction in the value of an asset over time as recorded in financial statements. This figure reflects how much of the asset's value has been consumed due to use, wear and tear, and other factors, according to accounting principles. On the other hand, appraisers are concerned with actual depreciation, which refers to the decrease in property value due to external factors such as market conditions, physical deterioration, economic obsolescence, or changes in the neighborhood. Appraisers assess how much a property is worth in the current market, which can differ significantly from the accountancy-related book value. This distinction is crucial in real estate practice because the purpose of each profession is fundamentally different: accountants aim to maintain accurate financial records and compliance with regulations, while appraisers provide an objective valuation of real estate to support transactions, financing, and investment decisions. Understanding this difference helps clarify why the correct statement focuses on the contrasting viewpoints of accountants and appraisers regarding depreciation.