What is the journal entry to record the depreciation expense?

The correct journal entry to record the depreciation expense involves debiting Depreciation Expense and crediting Accumulated Depreciation.

This entry reflects the usage of a fixed asset over time. By debiting Depreciation Expense, the company recognizes the expense for the period in which the asset was utilized, impacting the income statement. This adds to the overall expenses, reducing net income for that period.

On the other hand, crediting Accumulated Depreciation serves to increase this contra-asset account, which is shown on the balance sheet. Accumulated Depreciation accumulates the total depreciation taken against the asset since its acquisition, effectively reducing the book value of the asset over time. This dual impact ensures that both the income statement and the balance sheet are updated accurately to reflect the financial position of the company regarding its fixed assets.

Understanding this process is crucial for accurately tracking asset value and reporting financial performance.