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 is the correct adjusting entry to record the depreciation of a building for the fiscal period?

Debit Depreciation Expense—Building; Credit Building

Debit Depreciation Expense—Building; Credit Accumulated Depreciation—Building

Debit Building; Credit Depreciation Expense—Building

Debit Accumulated Depreciation—Building; Credit Depreciation Expense—Building

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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 during the fiscal period.

Identify the correct accounts involved: Depreciation Expense is an expense account that records the cost of depreciation for the period, and Accumulated Depreciation is a contra-asset account that accumulates the total depreciation recorded over time for the asset.

Recognize the correct adjusting entry format: The adjusting entry for depreciation involves debiting the Depreciation Expense account to increase expenses and crediting the Accumulated Depreciation account to increase the contra-asset balance.

Avoid common errors: Do not credit the Building account directly, as this would reduce the asset's value on the books, which is not the correct approach for recording depreciation. Instead, use the Accumulated Depreciation account to track the reduction in value.

Write the adjusting entry: The correct adjusting entry is 'Debit Depreciation Expense—Building; Credit Accumulated Depreciation—Building,' which properly reflects the expense and the accumulated reduction in the asset's value.