Is Depreciation a Debit or Credit?
Both, depending which account you mean. Depreciation expense is a debit and increases with a debit. Accumulated depreciation is a contra asset, so it is a credit and increases with a credit. Every depreciation entry does both at once.
- Account category
- Contra asset
- Normal balance
- Credit (Cr)
- Increases with
- Increase (Cr)
- Decreases with
- Decrease (Dr)
- Financial statement
- Balance sheet
- Contra account
- Sits against buildings and other depreciable assets
Classifying one account is easy. Ledger IQ classifies the whole trial balance.
Try it freeAccumulated depreciation on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 48,200.00 | |
| 1200 | Accounts receivable | 86,400.00 | |
| 1250 | Allowance for doubtful accounts | 4,200.00 | |
| 1500 | Equipment | 120,000.00 | |
| 1510 | Accumulated depreciation (the account this page is about) | 38,000.00 | |
| 2000 | Accounts payable | 31,500.00 | |
| 3000 | Common stock | 50,000.00 | |
| 3900 | Retained earnings | 92,000.00 | |
| 4000 | Sales revenue | 420,000.00 | |
| 5000 | Cost of goods sold | 240,000.00 | |
| 6000 | Operating expenses | 141,100.00 | |
| Total | 635,700.00 | 635,700.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Depreciation expense | 12,000.00 | |
| Accumulated depreciation | 12,000.00 |
| Account | Debit | Credit |
|---|---|---|
| Accumulated depreciation | 22,000.00 | |
| Equipment | 22,000.00 |
Why the question has two answers
Depreciation expense behaves like every other expense. It reduces equity, and anything reducing equity is a debit.
Accumulated depreciation is a contra asset. It sits in the asset section directly beneath the asset it relates to, but it carries a credit balance that reduces that asset to its net book value. It is not a liability, because nothing is owed to anyone. It records how much of the asset cost has been used up.
One entry moves both, every period, which is why the question has two correct answers.
How it looks on a trial balance export
Accumulated depreciation appears in the credit column, or as a negative number in a signed balance column. That is correct and it is what most exports look like.
What is wrong is accumulated depreciation as a positive number or in the debit column, which usually means the entry was posted backwards.
The figure on the trial balance is the book accumulated depreciation. The asset module inside your tax software is carrying a different number, because it is running MACRS, Section 179 and bonus depreciation. Schedule L wants the book figure, and the difference between the two belongs on Schedule M-1.
Mistakes that throw it off
Pulling accumulated depreciation from the tax depreciation schedule. The balance sheet then reports tax accumulated depreciation against book cost, and Schedule L is out by the cumulative book to tax difference.
Netting cost and accumulated depreciation into one account. Schedule L reports them on separate lines, so the split has to survive into the workpaper.
Scrapping an asset with no entry. Cost and accumulated depreciation both sit there forever, inflating two lines by the same amount. Harmless on net book value, misleading in the detail, and it makes a fixed asset rollforward impossible to prove.
Posting the depreciation entry twice, once from the depreciation schedule and once from the bookkeeper's monthly accrual. Book depreciation doubles, net income moves, and the M-1 is off by the duplicate.
Where it fits in the accounting equation
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Page 1 line 20 for the expense, Schedule L line 10b for accumulated |
| Form 1120S | Page 1 line 14 for the expense, Schedule L line 10b for accumulated |
| Form 1065 | Page 1 line 16c for the expense, Schedule L line 9b for accumulated |
Common questions
To increase depreciation, is it a debit or credit?
Both, in the same entry. To increase depreciation expense you debit it, and to increase accumulated depreciation you credit it. The standard entry debits depreciation expense and credits accumulated depreciation by the same amount, so the income statement picks up the expense and the balance sheet picks up the reduction in the asset net book value.
Is accumulated depreciation a debit or credit?
A credit. Accumulated depreciation is a contra asset account, so it runs opposite to the asset it sits against. It increases with a credit, decreases with a debit, and carries a normal credit balance. It only decreases when an asset is sold, scrapped or otherwise disposed of, or when an overstatement is corrected.
Is accumulated depreciation an asset or a liability?
Neither exactly. It is a contra asset: it is reported in the asset section of the balance sheet, directly beneath the depreciable asset, but it carries a credit balance that reduces that asset to its net book value. It is not a liability, because nothing is owed to anyone. It simply records how much of the asset cost has been used up.
What is the journal entry for depreciation?
Debit depreciation expense and credit accumulated depreciation for the period amount. For a 60,000 vehicle depreciated straight line over five years with no salvage value, the annual entry is a 12,000 debit to depreciation expense and a 12,000 credit to accumulated depreciation, or 1,000 each month.
Where does depreciation go on the tax return?
Depreciation expense is reported on page 1: line 20 of Form 1120, line 14 of Form 1120S, and line 16c of Form 1065, using tax depreciation from Form 4562 rather than the book figure. Accumulated depreciation is reported on Schedule L at the book figure: line 10b on Forms 1120 and 1120S, and line 9b on Form 1065.
Why does accumulated depreciation show as a negative number on my trial balance?
Because the export uses a single signed balance column, where credit balances print as negatives or in parentheses. That is correct. On an export with separate debit and credit columns it appears in the credit column instead. What is wrong is accumulated depreciation showing as a positive number or in the debit column, which usually means the entry was posted backwards.
Last reviewed October 17, 2026.