Multiple Choice
Which of the following accounts are included in the journal entry to record depreciation expense for the period?
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3. Accrual Accounting Concepts
Adjusting Entries: Depreciation
Multiple Choice
Which type of adjusting entry is made to account for depreciation at the end of an accounting period?
A
Debit Depreciation Expense and credit Accumulated Depreciation
B
Debit Accumulated Depreciation and credit Depreciation Expense
C
Debit Depreciation Expense and credit Equipment
D
Debit Equipment and credit Cash
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 reflects the wear and tear or obsolescence of the asset during the accounting period.
Identify the 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.
Determine the correct adjusting entry: At the end of the accounting period, the adjusting entry for depreciation involves debiting Depreciation Expense to increase expenses and crediting Accumulated Depreciation to increase the contra-asset account.
Understand why other options are incorrect: For example, debiting Equipment and crediting Cash would represent a purchase of equipment, not depreciation. Similarly, debiting Accumulated Depreciation and crediting Depreciation Expense would reverse the correct entry.
Apply the adjusting entry: The correct journal entry is: Debit Depreciation Expense and Credit Accumulated Depreciation. This ensures the financial statements accurately reflect the asset's reduced value and the expense incurred during the period.
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