Question

What would be the appropriate journal entry to adjust to the accrual basis of accounting for depreciation on general capital assets related to prior years?

A. Debit Depreciation expense, Credit Accumulated Depreciation.
B. Debit Accumulated Depreciation, Credit Net Position.
C. Debit Machinery, Credit Accumulated Depreciation.
D. Debit Net Position, Credit Accumulated Depreciation.

Answer 1

The correct journal entry is to debit Depreciation expense and credit Accumulated Depreciation. This reflects the usage of the capital assets over their useful life and increases the accumulated depreciation on the assets.

Step-by-step explanation:

The appropriate journal entry to adjust to the accrual basis of accounting for depreciation on general capital assets related to prior years would be:

Debit Depreciation expense, Credit Accumulated Depreciation.

This entry ensures that the expense reflects the usage of the asset over the period it benefits, and Accumulated Depreciation is increased to represent the total depreciation taken on the asset since its acquisition. No entry is made directly to the asset account (Machinery) or Net Position in this context, as these do not represent the annual adjustment for depreciation.