Multiple Choice
In adjusting entries for depreciation, accumulated depreciation and depreciation expense are classified, respectively, as:
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3. Accrual Accounting Concepts
Adjusting Entries: Depreciation
Multiple Choice
In the balance sheet, accumulated depreciation is classified as a(n):
A
Contra asset account (reduces the related asset account)
B
Expense account
C
Current liability account
D
Revenue account
Verified step by step guidance1
Understand the nature of accumulated depreciation: it represents the total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.
Recall that depreciation expense reduces the book value of an asset over time, but accumulated depreciation itself is not an expense; it is a balance sheet account.
Identify that accumulated depreciation is recorded as a negative or contra account linked to the related asset account, effectively reducing the asset's carrying amount.
Recognize that accumulated depreciation is not classified as an expense account, liability account, or revenue account because it does not represent a cost incurred, an obligation, or income.
Conclude that in the balance sheet, accumulated depreciation is classified as a contra asset account, which offsets the asset's value.
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