Record acquisition and depreciation entries
Use ledger accounts and journal entries to record an asset purchase, annual depreciation and the carrying amount.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.3 only. Practice is self-checked, not an official Cambridge grade; the separately published 2029 syllabus, timed papers and human subject-teacher review remain outstanding.
Before you begin
- Topics 1.1 and 1.2 introduce business resources, equity, double entry and period profit. Use those ideas when recording non-current assets.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A machine is bought for cash. Which account is credited at acquisition?
What you will learn
- Record a non-current asset acquired for cash or credit
- Record depreciation in ledger accounts
- Explain the two statement effects of depreciation
Record the asset and how it was financed
When the business acquires a non-current asset, debit the asset account at the amount recognised under the applicable requirements. Credit cash or bank if paid immediately, or the relevant payable or finance account if not.
The acquisition is not normally an immediate expense in full when the asset benefits several periods. A separate depreciation entry allocates its depreciable amount to the periods benefiting from use.
Record depreciation separately
A common entry is debit depreciation expense and credit accumulated depreciation. The expense reduces profit; accumulated depreciation reduces the asset's carrying amount in the statement of financial position.
The charge does not credit bank. Keep original cost and accumulated depreciation visible so the asset's cost and cumulative use can be reviewed.
Pause and explain
What is the immediate statement effect of a $1,200 depreciation charge, before tax?
Worked example
A machine costing $15,000 is bought on credit. The business later records $2,000 depreciation for the year. Give both journal entries.
Show the worked solution
- Acquisition: debit Machinery $15,000; credit Supplier payable $15,000.
- Depreciation: debit Depreciation expense $2,000; credit Accumulated depreciation $2,000.
- The payable records the unpaid acquisition; depreciation is a non-cash period expense.
Answer On acquisition: Dr Machinery $15,000, Cr Supplier payable $15,000. Depreciation: Dr Depreciation expense $2,000, Cr Accumulated depreciation $2,000.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A business pays $8,500 cash for equipment and records $1,700 depreciation. Write both entries.
Give me a hint
Separate the purchase from the period charge.
Compare my reasoning
- Acquisition: debit Equipment $8,500.
- Credit Bank $8,500 for the payment.
- Depreciation: debit expense $1,700 and credit accumulated depreciation $1,700.
Dr Equipment $8,500, Cr Bank $8,500. Dr Depreciation expense $1,700, Cr Accumulated depreciation $1,700.
Look for these in your work
- Acquisition debit correct
- Bank credit correct
- Depreciation entry correct
A vehicle cost $32,000 and accumulated depreciation is $12,000. Give its carrying amount under the cost model and explain where the current-period charge appears.
Give me a hint
Subtract the accumulated amount and distinguish profit or loss from financial position.
Compare my reasoning
- Carrying amount = 32,000 − 12,000 = $20,000.
- The current-period depreciation expense appears in the statement of profit or loss.
- Accumulated depreciation is deducted from cost in the statement of financial position.
Carrying amount is $20,000. Current depreciation is an expense in profit or loss and the accumulated amount reduces the asset's carrying amount in the statement of financial position.
Look for these in your work
- Calculation correct
- Profit-or-loss effect stated
- Position effect stated
An accountant records depreciation by debiting the asset account directly. What should the accountant check before deciding whether this is incorrect?
Give me a hint
Some systems credit accumulated depreciation; other ledger formats may credit the asset directly.
Compare my reasoning
- Identify the ledger format and the accounting policy being used.
- Check that the asset's carrying amount and depreciation expense are correct.
- Do not assume the contra-account presentation is the only possible ledger layout.
Check the accounting policy and ledger presentation. A business may credit accumulated depreciation or, in some formats, the asset account directly; the resulting carrying amount and expense must still be correct.
Look for these in your work
- Presentation checked
- Amounts checked
- No unsupported rule
Common mistakes
- Crediting bank for depreciation
- Crediting the supplier when the asset was paid for in cash
- Combining acquisition cost and annual depreciation into one entry
What can you explain now?
What is the credit entry for a depreciation charge when the business keeps an accumulated-depreciation account?
Compare with the explanation
Accumulated depreciation
The contra-asset account records total depreciation to date.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Write the common depreciation journal entry and name each statement effect.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.