Final answer:
Option 3 does not correctly describe an adjusting entry that debits depreciation expense and credits accumulated depreciation as it does not decrease the asset's original cost on the balance sheet, but instead increases the accumulated depreciation account.
Step-by-step explanation:
The adjusting journal entry that debits depreciation expense and credits accumulated depreciation is not correctly described by option 3) 'It decreases the value of the asset on the balance sheet.' While this journal entry does reflect the usage of an asset over a period of time, the book value of the asset on the balance sheet remains unchanged because only the accumulated depreciation account is increased. The cost of the asset stays the same, and the increase in accumulated depreciation represents the total depreciation taken to date, which is subtracted from the asset's original cost to determine its current book value. Adjusting entries for depreciation are indeed recorded at the end of an accounting period (option 1), are used to allocate the cost of an asset over its useful life (option 2), and are non-cash transactions (option 4).