Multiple Choice
What are the effects on the accounting equation from the adjustment for depreciation?
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3. Accrual Accounting Concepts
Adjusting Entries: Depreciation
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Which of the following is the correct adjusting journal entry to record depreciation expense for the period?
A
Debit Accumulated Depreciation; Credit Depreciation Expense
B
Debit Depreciation Expense; Credit Accumulated Depreciation
C
Debit Depreciation Expense; Credit Equipment
D
Debit Equipment; Credit Depreciation Expense
Verified step by step guidance1
Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It represents the wear and tear or obsolescence of the asset over time.
Identify the accounts involved: Depreciation Expense is an income statement account that records the expense for the period, while Accumulated Depreciation is a contra-asset account on the balance sheet that reduces the value of the asset.
Determine the correct journal entry: The adjusting journal entry for depreciation involves debiting Depreciation Expense to record the expense and crediting Accumulated Depreciation to increase the contra-asset account.
Understand why other options are incorrect: For example, debiting Accumulated Depreciation and crediting Depreciation Expense reverses the correct entry, and debiting Equipment and crediting Depreciation Expense incorrectly reduces the asset account directly instead of using Accumulated Depreciation.
Apply the correct journal entry format: The correct adjusting journal entry is: Debit Depreciation Expense; Credit Accumulated Depreciation. This ensures proper financial reporting and compliance with accounting principles.
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