Multiple Choice
In recording the adjusting entry for depreciation, which account is debited and which account is credited?
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3. Accrual Accounting Concepts
Adjusting Entries: Depreciation
Multiple Choice
The journal entry to record depreciation on factory equipment is to:
A
Debit Factory Equipment; Credit Depreciation Expense
B
Debit Depreciation Expense; Credit Accumulated Depreciation
C
Debit Depreciation Expense; Credit Factory Equipment
D
Debit Accumulated Depreciation; Credit Depreciation Expense
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 over time.
Identify the correct accounts involved: Depreciation Expense is an expense account that records the periodic depreciation cost, and Accumulated Depreciation is a contra-asset account that accumulates the total depreciation recorded for an asset.
Determine the correct journal entry: Depreciation Expense is debited to increase the expense, and Accumulated Depreciation is credited to increase the contra-asset account, reducing the book value of the asset.
Understand why other options are incorrect: For example, debiting Factory Equipment directly would incorrectly increase the asset's value, which is not the purpose of recording depreciation.
Apply the correct journal entry format: The journal entry should be written as follows: Debit Depreciation Expense; Credit Accumulated Depreciation. This reflects the periodic depreciation cost and the reduction in the asset's book value.
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