SAP Business One Certification Practice Exam

What does a depreciation run create in financial reporting?

1. Only reports

2. Journal entries

3. Asset valuations

4. Expense summaries

The correct answer is: Journal entries

A depreciation run in financial reporting primarily creates journal entries. This process involves the systematic allocation of the cost of tangible assets over their useful lives, which is recognized as an expense on the income statement. When a depreciation run is executed, it generates journal entries that record the expense in the appropriate period, impacting the financial statements by reducing net income and also updating the asset's book value. The significance of journal entries in this context lies in their role in maintaining accurate financial records that reflect the company's financial position over time. While reports, asset valuations, or expense summaries may provide insights into various financial aspects, the direct action taken during a depreciation run is to create those journal entries that ensure compliance with accounting principles and proper financial reporting.