Question

Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building. Debit Depreciation expense; credit Accumulated depreciation. Debit Depreciation expense; credit Building. Debit Accumulated depreciation; credit Depreciation expense. Debit Building; credit Accumulated depreciation.

Answer 1

Answer:

Debit Depreciation expense; credit Accumulated depreciation.

Explanation:

Depreciation bis a measure of loss of value of an asset in the process of production over time. For example if a machine is purchased at $100,000, it will have a useful life expressed in years let's say 20 years, and a salvage value ( value of the asset after its useful life.

On purchase of an asset deviation is estimated per unit time for example into the example above 100,000/20= $5,000 per year.

This amount is recorded in a year as depreciation that has accumulated till the useful life of the asset is used up.

The entry involves recognising the expense (depreciation) by debiting Depreciation Expense and Crediting Accumulated Depreciation to show the value of the asset that has depreciated in that time.