Depreciation Expense
Definition: Periodic allocation of asset cost
Scope:BroadDifficulty:Easy
Periodic allocation of asset cost
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Monthly depreciation | ||
| Equipment: $30,000 per year / 12 = $2,500/mo. | ||
| Depreciation ExpenseExpense+ | $2,500 | |
| Accumulated DepreciationContra Asset+ | $2,500 | |
| Adjusting entry each period to allocate cost. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Depreciation ExpenseDepreciation ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$2,500.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$2,500.00
Accumulated DepreciationAccumulated DepreciationLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$2,500.00
Normal bal. ▶
$2,500.00
DurationN/A
Related Accounting Types
- Financial Accounting(Primary)
- Cost Accounting(Primary)
- Tax Accounting(Secondary)
- Auditing(Secondary)
Related Reports
- Income Statement(Primary — Operating expense)
- Statement of Cash Flows (Report)(Primary — Add-back in operating)
- Form 10-K Annual Report(Primary — PP&E note)
- Fixed Asset Register / Depreciation Schedule(Primary — Detail per asset)
- Form 1120 Corporate Income Tax Return(Secondary — MACRS vs book difference)
Related Subjects
Used In
- Financial AccountingRelated type
- Cost AccountingRelated type
- Tax AccountingRelated type
- AuditingRelated type
See Also
- Accumulated DepreciationPaired in entry: Record depreciation expense
- CashPaired in entry: Record finance lease depreciation and interest
External Links
- Depreciation — Wikipedia