Question: After depreciation has been calculated for the current period, how is this allocation of the asset’s cost
to expense recorded within the company’s accounting system?
Answer: An adjusting entry is prepared at the end of each period to move the assigned cost from the asset account
on the balance sheet to expense on the income statement. To reiterate, the building account is not directly reduced.
A separate negative or contra account (accumulated depreciation) is created to reflect the total amount of the cost
that has been expensed to date. Thus, the asset’s present book value as well as its original historical cost are both
still in evidence.