What is the adjusting entry to record a $5,000 depreciation expense in the general ledger?

The correct approach to recording a $5,000 depreciation expense in the general ledger involves properly reflecting the decrease in asset value and the associated expense on the financial statements. By debiting Depreciation Expense, the business acknowledges the expense incurred during the accounting period, which ultimately impacts the income statement. This entry matches the expense with the revenue generated in that period, adhering to the matching principle in accounting.

Simultaneously, by crediting Accumulated Depreciation, the business records a contra asset account that represents the cumulative depreciation taken on fixed assets over time. This effectively reduces the book value of the asset on the balance sheet without impacting the cash flow since depreciation is a non-cash expense.

This entry accurately reflects the reduction in asset value that occurs as a result of wear and tear, usage, or obsolescence of the asset. It ensures that the financial statements present a truthful view of the company's financial status and performance.