Harvard Financial Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?
A)Depreciation Expense
B)Service Revenue
C)Accumulated Depreciation
D)Equipment Expense

Question

Quizplus · Accepted Answer

According to the matching principle, when a company purchases an asset, such as the computers in this scenario, it is expected to use it over a period of time. Therefore, a portion of the cost of the asset is allocated as an expense each year through depreciation. This expense is recorded in the Depreciation Expense account. However, since the company is not disposing of the computers, the total cost of the asset will continue to appear on the balance sheet. To reflect the allocation of the cost as an expense and the total cost of the asset still remaining, the Accumulated Depreciation account is created. Therefore, the correct answer is C - Accumulated Depreciation.