Business – 10.1 Financial statements – Depreciation | e-Consult
10.1 Financial statements – Depreciation (1 questions)
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Annual depreciation expense:
| Cost of machine | £120,000 |
| Useful life | 5 years |
| Residual value | £0 |
| Annual depreciation | £120,000 ÷ 5 = £24,000 |
Journal entry for Year 1:
- Debit Depreciation Expense £24,000
- Credit Accumulated Depreciation – Machinery £24,000
This entry recognises the expense in the profit and loss account and increases the contra‑asset account that reduces the machine’s carrying amount on the balance sheet.