What are the two types of depreciation recognized in property assessment?

The correct answer identifies the two primary forms of depreciation recognized in property assessment: physical and functional depreciation.

Physical depreciation refers to the loss in property value due to wear and tear, damage, or deterioration over time. This can be caused by various factors such as age, neglect, or environmental conditions. When assessing a property, appraisers account for this type of depreciation to accurately determine the current value due to its physical condition.

Functional depreciation, on the other hand, occurs when a property's design or features become outdated or less useful compared to current standards or market expectations. This can happen when new technologies or design trends emerge, making older properties less desirable even if they are still structurally sound.

Recognizing both physical and functional depreciation is essential for appraisers, as it allows for an accurate estimate of a property's worth, taking into account both its condition and its relevance in the current market.

The other choices, while they contain terms related to valuation and accounting, do not specifically address the types of depreciation relevant to property assessment as outlined in the context of this question.