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

In recording the adjusting entry for depreciation, which account is debited and which account is credited?

Debit Equipment; Credit Depreciation Expense

Debit Depreciation Expense; Credit Accumulated Depreciation

Debit Accumulated Depreciation; Credit Depreciation Expense

Debit Depreciation Expense; Credit Equipment

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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.

Identify the accounts involved: Depreciation Expense is an expense account that represents the cost of using the asset during the accounting period. Accumulated Depreciation is a contra-asset account that reduces the value of the asset on the balance sheet.

Determine the correct adjusting entry: The adjusting entry for depreciation involves debiting the Depreciation Expense account to record the expense and crediting the Accumulated Depreciation account to reflect the reduction in the asset's value.

Avoid common mistakes: Do not debit Equipment or credit Depreciation Expense directly, as these actions would misrepresent the financial statements. Equipment remains unchanged, and Depreciation Expense is only debited to record the expense.

Write the journal entry: The correct journal entry is: Debit Depreciation Expense; Credit Accumulated Depreciation. This ensures the expense is recorded in the income statement and the reduction in asset value is reflected in the balance sheet.