Question

What is the correct journal entry when depreciation is transferred to the Profit & Loss account?

Options

• Asset account debited and Profit & Loss account credited

• Profit & Loss account debited and Depreciation account credited

• Depreciation account debited and Profit & Loss account credited

• Profit & Loss account debited and Asset account credited

Answer 1

Profit & Loss account debited and Depreciation account credited

Explanation:

Depreciation is an expense that reduces income, so the Profit & Loss account is debited (showing expense), and the Depreciation account is credited (to close it).