Which account is credited in an adjusting entry to record depreciation on machinery?

• A. Accumulated Depreciation—Machinery
• B. Depreciation Expense—Machinery
• C. Machinery
• D. Cash

Answer: (A)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It reflects the wear and tear or obsolescence of the asset over time.
2. Identify the accounts involved: Depreciation is recorded using two accounts—Depreciation Expense (an expense account) and Accumulated Depreciation (a contra-asset account). The machinery account itself is not directly adjusted, and cash is not involved in this entry.
3. Determine the nature of the adjusting entry: Depreciation Expense is debited to recognize the expense for the period, and Accumulated Depreciation is credited to reflect the reduction in the book value of the asset.
4. Understand why Accumulated Depreciation is credited: Accumulated Depreciation is a contra-asset account that offsets the Machinery account. Crediting this account increases its balance, which reduces the net book value of the machinery on the balance sheet.
5. Prepare the adjusting entry: The journal entry for recording depreciation would be: Debit Depreciation Expense—Machinery and Credit Accumulated Depreciation—Machinery. This ensures proper recognition of the expense and adjustment of the asset's value.