Journal entry for Depreciation

Journal entry for Depreciation

In this article we would discusses the journal entry for depreciation. The depreciation can be recorded in the books of account in two ways. These methods have been explained below

Recording Rule of Depreciation

Fixed asset usage (gradual decrease in value) is recognized in terms of depreciation. Depreciation is an expense and thus debited in the books of account and either asset or accumulated depreciation is credited.

1.   Direct Depreciation Method

Depreciation may be directly charged to the asset by debiting the depreciation and crediting the asset. For example a depreciation of amounting $ 20,000 on plant and machinery may be recorded as under.

Date	Particulars	Dr	Cr
	Depreciation A/c	20,000
	Plant & Machinery		20,000

2.   Accumulated Depreciation Method

In this method depreciation is charged against the contra account know as accumulated depreciation. This method is mostly used by the companies due to better presentation. This method facilitates the disclosure of original cost of asset and total depreciation charged till date.

Date	Particulars	Dr	Cr
	Depreciation A/c	20,000
	Accumulated Depreciation		20,000

The above method facilitates the following presentation of assets.

Plant & machinery	100,000
Less: Accumulated Depreciation	20,000
Carrying amount	80,000