Which accounts are typically affected by recording depreciation expense?

Which accounts are typically affected by recording depreciation expense?

• A. Depreciation expense and accumulated depreciation
• B. Cash and accounts payable
• C. Inventory and cost of goods sold
• D. Revenue and accounts receivable

Answer: (A)

Depreciation recognizes the cost of using a long-lived asset over its useful life, and the entry reflects that with an expense on the income statement and an adjustment on the balance sheet. Debiting depreciation expense records the cost as an expense this period, which reduces net income. Crediting accumulated depreciation, a contra-asset, increases that accumulation and reduces the asset’s book value over time. Since depreciation is non-cash, cash isn’t touched in this entry, and it doesn’t involve accounts like cash, accounts payable, inventory, COGS, revenue, or accounts receivable in the standard recording. The combination of an expense and a corresponding contra-asset is why these two accounts are the ones typically affected.

Depreciation recognizes the cost of using a long-lived asset over its useful life, and the entry reflects that with an expense on the income statement and an adjustment on the balance sheet. Debiting depreciation expense records the cost as an expense this period, which reduces net income. Crediting accumulated depreciation, a contra-asset, increases that accumulation and reduces the asset’s book value over time. Since depreciation is non-cash, cash isn’t touched in this entry, and it doesn’t involve accounts like cash, accounts payable, inventory, COGS, revenue, or accounts receivable in the standard recording. The combination of an expense and a corresponding contra-asset is why these two accounts are the ones typically affected.