In the adjusting entry process, depreciation expense is classified as which type of account?

• A. Revenue (income statement account)
• B. Liability (balance sheet account)
• C. Asset (balance sheet account)
• D. Expense (income statement account)

Answer: (D)

Verified step by step guidance

1. Understand the nature of depreciation expense: it represents the allocation of the cost of a tangible asset over its useful life, reflecting the usage and wear of the asset during the accounting period.
2. Recall the classification of accounts: expenses are costs incurred by a business to generate revenue and are reported on the income statement.
3. Recognize that depreciation expense reduces the book value of an asset and is recorded as an expense to match the cost with the revenue it helps to generate, following the matching principle.
4. Identify that depreciation expense is not a revenue account (which records income), nor a liability (which represents obligations), nor an asset (which represents resources owned).
5. Conclude that depreciation expense is classified as an expense account on the income statement, reflecting the periodic cost of using fixed assets.