Final answer:
To record the annual depreciation for equipment, a debit of $2,200 is made to Depreciation Expense-Equipment and a credit of $2,200 to Accumulated Depreciation-Equipment. This reflects equipment use over the year and adheres to the matching principle in accounting.
Step-by-step explanation:
Debit: Depreciation Expense-Equipment $2,200
Credit: Accumulated Depreciation-Equipment $2,200
When a company uses equipment over time, it generally loses value due to wear and tear; this is known as depreciation. The process of recording depreciation in accounting involves an adjusting entry that reflects the cost of the use of equipment during a specific period, typically a year. Having an accurate representation of the equipment's value on the balance sheet ensures that financial statements represent the true financial position of the company.
On December 31, the company needs to make an adjusting entry to account for the use (depreciation) of the equipment during the year. The journal entry increases the expense for the company, reflecting the cost of the benefit derived from the equipment's use. Simultaneously, this entry increases the accumulated depreciation account, which is a contra-asset account, reducing the value of the equipment on the balance sheet. The necessity of this entry is derived from the matching principle in accounting, which dictates that expenses should be recorded in the same period as the revenues they help to generate.