What kind of account is typically adjusted through depreciation?

Depreciation typically affects asset accounts because it is a method used to allocate the cost of tangible assets over their useful lives. When an asset, such as machinery, equipment, or buildings, is purchased, its cost is recorded as an asset on the balance sheet. Over time, as the asset is used, it loses value due to wear and tear, obsolescence, or other factors.

The process of adjusting the asset account through depreciation allows a business to recognize this loss in value, which is reflected through a corresponding expense on the income statement. This aligns the cost of using the asset with the revenues it helps to generate over time. Therefore, the asset account is reduced by the amount of the depreciation expense recorded, which accurately portrays the asset's current value on the balance sheet.

This is distinct from liability accounts, which represent obligations that the business owes, revenue accounts that reflect income earned, and equity accounts that show the owners’ residual interest in the assets of the business—none of which involve adjustments for depreciation.