BACHELOR OF BUSINESS ADMINISTRATION

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BUSINESS ADMINISTRATION

FINANCIAL ACCOUNTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
During the year, Ferguson made the following accounting entries to account for the depreciation charge relating to motor vehicles:Debit Accumulated depreciation-motor vehicles $5, 000 Credit Depreciation expense-motor vehicles $5, 000What are the journal entries required to account correctly for the depreciation charge for motor vehicles for the year?
A
Debit Motor vehicles $5, 000, and Credit Accumulated depreciation $5, 000
B
Debit Depreciation Expense $10, 000, and Credit Accumulated depreciation $10, 000
C
Debit Depreciation expense $5, 000, and Credit Accumulated depreciation $5, 000
D
Debit Accumulated depreciation $10, 000, and Credit Depreciation expense $10, 000
Explanation: 

Detailed explanation-1: -The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).

Detailed explanation-2: -Accumulated depreciation is recorded in a contra asset account, meaning it has a credit balance, which reduces the gross amount of the fixed asset. As a result, it is not recorded as an asset or a liability.

Detailed explanation-3: -The adjusting entry to record depreciation includes a debit to the Depreciation Expense account and a credit to the Accumulated Depreciation account, a contra asset account.

Detailed explanation-4: -Depreciation or deterioration cost is written down from the actual value of the asset, the worth of a fixed value matches and is suitably addressed on the accounting report. On the income statement, devaluation is typically displayed as an indirect operating or working cost.

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