How should depreciation that is already listed in the Trial Balance be treated?
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Answer: A. Debited to P&L A/c
Explanation
Depreciation listed inside the trial balance has already been adjusted and is debited directly to the Profit and Loss Account. Because it is already in the trial balance, adjusting entries have been completed. It is treated purely as a period operating expense. Trial balances summarize all general ledger balances after routine transaction postings. Items inside the trial balance require only single reporting placement on financial statements. Unadjusted items listed outside require both P&L debit and balance sheet credit actions.
Bookkeepers must distinguish between trial balance items and footnote adjustments during financial statement preparation. Correct placement prevents double-counting of depreciation expenses. This ensures accurate net income reporting for shareholders and tax authorities. Showing depreciation as a liability is incorrect because depreciation is an expense or contra-asset. Reducing the asset directly happens during the adjusting entry phase, but trial balance depreciation has already updated the ledger. Thus, debiting the Profit and Loss Account is the correct treatment.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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