How is depreciation on equipment recorded?

• A. Debit Depreciation Expense; Credit Accumulated Depreciation
• B. Debit Accumulated Depreciation; Credit Depreciation Expense
• C. Debit Equipment; Credit Cash
• D. Debit Depreciation Expense; Credit Cash

Answer: (A)

Depreciation allocates the cost of a long-lived asset over its useful life, recognizing an expense while reducing the asset’s carrying value. On the books, expenses increase with a debit, and accumulated depreciation is a contra-asset that increases with a credit. So the proper entry is to debit Depreciation Expense to reflect the period’s expense and credit Accumulated Depreciation to accumulate the total depreciation against the Equipment’s value. Cash is not affected because depreciation is a noncash accounting entry. Debiting the Equipment would falsely increase its value, and debiting Accumulated Depreciation would decrease the contra-asset balance, which is the opposite of what depreciation does.