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 year-end adjusting entry to record the first year's depreciation expense for a used machine?

Debit Depreciation Expense; Credit Equipment

Debit Equipment; Credit Depreciation Expense

Debit Depreciation Expense; Credit Accumulated Depreciation

Debit Accumulated Depreciation; Credit Depreciation Expense

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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 is recorded as an expense to reflect the usage or wear and tear of the asset during the accounting period.

Identify the correct accounts involved: Depreciation Expense is an expense account that reflects the cost of using the asset, while Accumulated Depreciation is a contra-asset account that reduces the book value of the asset on the balance sheet.

Determine the correct journal entry: The adjusting entry for depreciation involves debiting Depreciation Expense to record the cost of the asset's usage and crediting Accumulated Depreciation to reflect the reduction in the asset's value.

Avoid common errors: Do not debit or credit the Equipment account directly, as this account reflects the original cost of the asset and is not adjusted for depreciation. Similarly, do not reverse the roles of Depreciation Expense and Accumulated Depreciation.

Write the adjusting entry: The correct year-end adjusting entry is: Debit Depreciation Expense; Credit Accumulated Depreciation. This ensures that the expense is recorded on the income statement and the reduction in asset value is reflected on the balance sheet.