What is the correct journal entry for depreciation expense in a non-manufacturing company?

In the context of accounting for depreciation in a non-manufacturing company, the correct journal entry involves recognizing depreciation expense and adjusting the accumulated depreciation account accordingly.

When a company incurs depreciation expense, it reflects the allocation of the cost of a tangible asset over its useful life. To record this expense, the depreciation expense account is debited, which increases the company's expenses and reduces net income. At the same time, the accumulated depreciation account—a contra asset account—is credited, which increases the total accumulated depreciation recorded against the asset on the balance sheet. This dual entry ensures that the asset's book value decreases over time in accordance with its usage or wear and tear.

The specific entry of debiting depreciation expense and crediting accumulated depreciation accurately reflects the recording of this allocation process in the financial statements. By increasing both the expense and the contra asset account, the company maintains proper records regarding the asset and its diminishing value.