ACCA Applied Knowledge · Financial Accounting · Depreciation
Dalton Co charges annual depreciation on its machinery. Which of the following is the correct double entry to record the annual depreciation charge?
Debit depreciation expense and credit accumulated depreciation. The expense reduces profit for the period, while the accumulated depreciation account builds up the total written off against the asset and keeps the original cost in the ledger unchanged.
- ADebit Depreciation expense; credit Accumulated depreciationCorrect
- BDebit Accumulated depreciation; credit Depreciation expense
- CDebit Machinery cost; credit Depreciation expense
- DDebit Depreciation expense; credit Machinery cost
Explanation
The charge is an expense, so it is debited to profit or loss. The credit goes to the accumulated depreciation account, which is a contra account to the asset's cost. Crediting cost directly would break the separate cost and accumulated depreciation records.
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