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 type of adjusting entry is made to account for depreciation at the end of an accounting period?

Debit Depreciation Expense and credit Accumulated Depreciation

Debit Accumulated Depreciation and credit Depreciation Expense

Debit Depreciation Expense and credit Equipment

Debit Equipment and credit Cash

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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 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.