What does an increase in depreciation expense mean?
Jackson Reed
Updated on February 10, 2026
Increasing Depreciation will increase expenses, thereby decreasing Net Income. It also reduces Net Income and therefore Retained Earnings (Shareholders’ Equity) as well. As discussed previously, Depreciation is a non-Cash expense. Therefore, increases or decreases to Depreciation will not impact Cash directly.
What type of account is depreciation expense?
Account Types
| Account | Type | Debit |
|---|---|---|
| DEPRECIATION EXPENSE | Expense | Increase |
| DISCOUNT ON BONDS PAYABLE | Liability | Decrease |
| DISCOUNT ON NOTES PAYABLE | Contra Liability | Increase |
| DIVIDEND INCOME | Revenue | Decrease |
Why do you increase depreciation with a credit?
You increase it with a credit because it essentially is a substitute for reducing the cost of an asset as it loses value over time. This is a better approach than crediting the asset account directly, since it separates depreciation out from the asset valuation change that would occur if the company had disposed of the asset.
Where does the depreciation expense account go on the balance sheet?
The accounting entry for depreciation. The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).
How does accumulated depreciation affect the value of an asset?
Over the years, accumulated depreciation increases as depreciation expense is charged against the value of the fixed asset. When an asset is retired or sold, the total amount of the accumulated depreciation associated with that asset is reversed, completely removing the record of the asset from a company’s books.
Why are accounts payable credit or debit in accounting?
Why is Accounts Payable Credit or Debit? As a general accounting principle, it is to be noted that whenever there is increase xin the asset account, increase in expense account and decrease in the liability account, decrease in accounts of revenue and equity, then such entries would be recorded as a debit.
