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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Adjustment for depreciation

The estimated amount of depreciation on equipment for the current year is $10,650. Journalize the adjusting entry to record the depreciation.

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To prepare: The adjusting entry at the end of the year.

Explanation
  • Depreciation expense decreases the value of owner’s equity by $10,650 hence debit the depreciation expense by $10,650.
  • Accumulated depreciation is a contra-asset account, and it decreases the value of asset by $10,650. Hence, credit the accumulated depreciation for $10,650.

For the above journal entry the accounting equation is affected as below:

{Assets(Accumulated depreciation �

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