Depreciation expense directly increases which balance sheet account?

Depreciation expense directly increases which balance sheet account?

• A. Net PP&E
• B. Total Assets
• C. Accumulated Depreciation
• D. COGS

Answer: (C)

Depreciation expense is recorded as a non-cash charge that accumulates in a contra-asset account called accumulated depreciation. Each period, the amount of depreciation added increases this accumulated depreciation balance. On the balance sheet, the asset section shows gross PP&E minus accumulated depreciation to yield net PP&E; as accumulated depreciation rises, net PP&E falls. Depreciation is an income statement expense, so it doesn’t directly increase COGS or total assets. The direct balance sheet increase from depreciation is in accumulated depreciation.

Depreciation expense is recorded as a non-cash charge that accumulates in a contra-asset account called accumulated depreciation. Each period, the amount of depreciation added increases this accumulated depreciation balance. On the balance sheet, the asset section shows gross PP&E minus accumulated depreciation to yield net PP&E; as accumulated depreciation rises, net PP&E falls. Depreciation is an income statement expense, so it doesn’t directly increase COGS or total assets. The direct balance sheet increase from depreciation is in accumulated depreciation.