Question

Which of the following statements is true regarding the accounting for depreciation on office equipment?

a. The depreciation charge increases the balance in the Accumulated Depreciation account.
b. The depreciation charge increases the balance in the Manufacturing Overhead account instead of the Work in Process account.
c. The depreciation charge increases the balance in the Work in Process account instead of the Manufacturing Overhead account.
d. The depreciation charge increases the balance in the Finished Goods account instead of the Work in Process account.

Answer 1

It is accurate to say that the depreciation charge raises the balance in the accumulated depreciation account when accounting for office equipment.

The accounting technique of spreading out the cost of a tangible item over its useful life is known as depreciation. The amount of depreciation account shows how much of an asset's worth has been utilized. By purchasing assets over a predetermined length of time, it enables equipment businesses to generate income from the assets they own.

The initial cost of ownership is substantially lower because equipment businesses don't have to account for them totally in the year that assets are bought. A company's profitability might be significantly impacted if depreciation account is not taken into consideration. Long-term assets may also be depreciated by businesses for accounting and tax purposes.

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