Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?
a) The adjusting entry contains a different amount for Depreciation Expense and Accumulated Depreciation. |
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b) |
Depreciation expense only reflects the current period depreciation. Accumulated Depreciation contains depreciation since the asset was purchased. |
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c) |
The Accumulated Depreciation account contains the value of the long-lived asset as well as the depreciation. |
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d) The balances in the two accounts should be the same amount. |
Depreciation expense only reflects the current period depreciation. Accumulated Depreciation contains depreciation since the asset was purchased.
For example:-
Value of asset = $100,000
Life = 10 Years
Depreciation method = SLM
Date of purchase = 01/01/2014
On the basis of above date we will calculate Depreciation expense and accumulated Depreciation for the year 2017?
Since straight line method is applied so Depreciation expense for current year is 100,000/10=10,000
Accumulated depreciation = 40,000 (As accumulated Depreciation contains depreciation since the asset was purchased. So amount will be $10,000*4years)
Hence the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account.
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