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ACCA Applied Knowledge · Financial Accounting · Depreciation

Which journal correctly records the annual depreciation charge for plant under IFRS?

Debit depreciation expense and credit accumulated depreciation. The expense reduces profit for the period, while the accumulated depreciation account, a contra to the asset, builds up to reduce the carrying amount while leaving the original cost recorded unchanged.

  1. ADebit Accumulated depreciation, credit Depreciation expense
  2. BDebit Plant at cost, credit Depreciation expense
  3. CDebit Depreciation expense, credit Accumulated depreciationCorrect
  4. DDebit Depreciation expense, credit Plant at cost

Explanation

The charge is an expense in profit or loss, so Depreciation expense is debited. The credit goes to the accumulated depreciation account, which is netted against cost to give carrying amount. Crediting plant at cost would wrongly alter the recorded cost.

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