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 account is credited in an adjusting entry to record depreciation on machinery?

Accumulated Depreciation—Machinery

Depreciation Expense—Machinery

Machinery

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 over time.

Identify the accounts involved: Depreciation is recorded using two accounts—Depreciation Expense (an expense account) and Accumulated Depreciation (a contra-asset account). The machinery account itself is not directly adjusted, and cash is not involved in this entry.

Determine the nature of the adjusting entry: Depreciation Expense is debited to recognize the expense for the period, and Accumulated Depreciation is credited to reflect the reduction in the book value of the asset.

Understand why Accumulated Depreciation is credited: Accumulated Depreciation is a contra-asset account that offsets the Machinery account. Crediting this account increases its balance, which reduces the net book value of the machinery on the balance sheet.

Prepare the adjusting entry: The journal entry for recording depreciation would be: Debit Depreciation Expense—Machinery and Credit Accumulated Depreciation—Machinery. This ensures proper recognition of the expense and adjustment of the asset's value.