Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Depreciation

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Depreciation

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Multiple Choice

Which of the following accounts are affected by the journal entry to record depreciation expense?

Debit Depreciation Expense; Credit Equipment

Debit Accumulated Depreciation; Credit Depreciation Expense

Debit Equipment; Credit Depreciation Expense

Debit Depreciation Expense; Credit Accumulated Depreciation

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It reflects the wear and tear or obsolescence of the asset over time.

Identify the correct accounts involved in recording depreciation: Depreciation Expense is an income statement account that represents the cost of using the asset during the period, while Accumulated Depreciation is a contra-asset account on the balance sheet that reduces the value of the asset.

Analyze the journal entry: The correct journal entry to record depreciation is 'Debit Depreciation Expense; Credit Accumulated Depreciation.' This reflects the expense incurred and the reduction in the asset's book value.

Understand why Equipment is not credited: Equipment represents the original cost of the asset and is not directly reduced when recording depreciation. Instead, Accumulated Depreciation is credited to show the reduction in the asset's value over time.

Review the impact on financial statements: Depreciation Expense reduces net income on the income statement, while Accumulated Depreciation reduces the book value of Equipment on the balance sheet, providing a clearer picture of the asset's net value.