What does depreciation allocate over an asset's useful life?

Depreciation allocates the costs of a tangible asset over its useful life. This accounting method allows a business to spread the initial purchase price of the asset as an expense over the periods it is expected to be used, reflecting the asset's consumption and wear-and-tear over time. By doing so, it aligns the asset's cost with the revenue it generates, adhering to the matching principle in accounting. This systematic recognition of expense helps provide a more accurate picture of a company’s profitability during each accounting period, as it ensures that the expenses associated with an asset are matched against the income earned from utilizing that asset.

The other choices do not accurately describe what depreciation represents. Total revenue generated and cash received from sales relate to income flows rather than the cost allocation of assets. Expenses associated with liabilities pertain to financial obligations and do not involve the allocation of asset costs. Therefore, the correct answer effectively captures the purpose of depreciation in financial reporting and asset management.