How is depreciation expense typically recorded in the books?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Prepare for the Tracking Assets and Sales Test with comprehensive flashcards and multiple choice questions. Understand each concept with clear hints and explanations. Ace your exam confidently!

Multiple Choice

How is depreciation expense typically recorded in the books?

Explanation:
In accrual accounting, expenses increase with a debit. Depreciation is recognized as a period expense, so you debit the depreciation expense account to record the cost for the current period. The offset is a credit to accumulated depreciation, a contra-asset that reduces the asset’s carrying value on the balance sheet as depreciation accumulates over time. Debiting the accumulated depreciation would misstate both the expense and the asset value, and crediting depreciation expense would not correctly reflect an expense. So the standard recording is to debit depreciation expense and credit accumulated depreciation.

In accrual accounting, expenses increase with a debit. Depreciation is recognized as a period expense, so you debit the depreciation expense account to record the cost for the current period. The offset is a credit to accumulated depreciation, a contra-asset that reduces the asset’s carrying value on the balance sheet as depreciation accumulates over time. Debiting the accumulated depreciation would misstate both the expense and the asset value, and crediting depreciation expense would not correctly reflect an expense. So the standard recording is to debit depreciation expense and credit accumulated depreciation.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy