0
Want this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
What is the Difference between accumulated depreciation and depreciation?
Depreciation expense is a nominal account which will goin to net income at the end of term. Accumulated depreciation is a contra account with capital assets which shows up in balance sheet.
Is net balance the same as residual value?
No.Residual Value is the expected value of the asset at the END of it's useful life (either through sale or scrapping)Net Balance would be the Cost less any Accumulated Depreciation (Wear & Tear) less any Accumulated Impairment at the END of the current period
Is depreciation on balance sheet or income statement?
Depreciation on the income statement is the amount of depreciation expense that is appropriate for the period of time indicated in the heading of the income statement. The depreciation reported on the balance sheet is the accumulated or the cumulative total amount of depreciation that has been reported as expense on the income statement from the time the assets were acquired until the date of the balance sheet.Let’s illustrate the difference with an example. A company has only one depreciable asset that was acquired three years ago at a cost of $120,000. The asset is expected to have a useful life of 10 years and no salvage value. The company uses straight-line depreciation on its monthly financial statements. In the asset’s 36th month of service, the monthly income statement will report depreciation expense of $1,000. On the balance sheet dated as of the last day of the 36th month, accumulated depreciation will be reported as $36,000. In the 37th month, the income statement will report $1,000 of depreciation expense. At the end of the 37th month, the balance sheet will report accumulated depreciation of $37,000.
If the adjustment for depreciation for the year is inadvertently omitted will the assets on the balance sheet at the end of the period be understated?
No they will be overstated as depreciation will not have been taken into account.
What do you debit and credit when recording depreciation expense?
There are two ways to record depreciation. With and without using a contra t-account for accumulated depreciation. Example The company buys a machine for 100,000. The residual value is 0 and the expected economic lifetime is 10 years. Using straight line method this results in a yearly depreciation expense of 10,000. Without a contra t-account Depreciation expense machine debit 10,000; machines credit for 10,000. At the end of (say) the third year, machines has a debit value of 70,000. With a contra t-account Depreciation expense machine debit 10,000; accumulated depreciation machines credit for 10,000. At the end of (say) the third year, machines still has a debit value of 100,000. Accumulated depreciation machines has a credit value of 30,000. Jointly they show the net value (or book value) of 70,000, which is the same as when no contra t-account is used.
What is the Difference between accumulated depreciation and depreciation?
Depreciation expense is a nominal account which will goin to net income at the end of term. Accumulated depreciation is a contra account with capital assets which shows up in balance sheet.
How are accumulated depreciation and depreciation expenses similar?
Accumulated depreciation is all of the depreciation ever 'accumulated' against the assets currently in service. It is shown on the balance sheet as a 'contra' (negative) asset, directly below the assets it relates to. Depreciation expense is the current period's depreciation of the assets currently in service. It is shown on the income (P&L) statement as an expense. Example: Business purchased a truck for $20,000 which will last 5 years. For simplicity, we'll use 'straight-line' depreciation. End of Year One: Depreciation expense on Income Statement $4,000 (1/5th of $20,000) Accumulated Depreciation on balance sheet: $4,000 End of Year Two: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $8,000 (both years) End of Year Three: Depreciation expense on Income Statement $4,000 Accumulated Depreciation on balance sheet: $12,000 (all three years)
What is the entry to record depreciation expense?
There are two entries to record Depreciation Expense. Say we are depreciating a TruckDebit Depreciation Expense - Equipment TruckCredit Accumulated Depreciation - Equipment TruckAt the end of the Accounting Cycle when the books are closed Depreciation Expense will be closed out, Accumulated Depreciation will not be. It remains on the books as long as the item being depreciated is in use and still listed as an Asset.
Is net balance the same as residual value?
No.Residual Value is the expected value of the asset at the END of it's useful life (either through sale or scrapping)Net Balance would be the Cost less any Accumulated Depreciation (Wear & Tear) less any Accumulated Impairment at the END of the current period
Where does accumulated depreciation go?
Depreciation expense is part of income statement all other expenses are also part of income statement and that's the main purpose of preparing income statement to show all incomes and expenses.
What is depreciation and what difference between accumulated depreciation and depreciation expanes and where these adjustd in accounting system?
When a company buys an asset they have to spread the cost of the asset over it's useful economic lifetime, this is done with depreciation. The accumulated depreciation is the depreciation from previous years and the charge for the year is the amount being depricated that year, which will be charged to the profit and loss. The assets will shows as a debit balance while depreciation will show as a credit balance in the balance sheet. When charge the depreciation for the year you would credit the balance sheet and debit the profit and loss. So after the asset has come to the end of it's useful economic lifetime the value in the balance sheet will become zero or close to it as the credits of depreciation will cancel out the debit if the asset value.
Is depreciation on balance sheet or income statement?
Depreciation on the income statement is the amount of depreciation expense that is appropriate for the period of time indicated in the heading of the income statement. The depreciation reported on the balance sheet is the accumulated or the cumulative total amount of depreciation that has been reported as expense on the income statement from the time the assets were acquired until the date of the balance sheet.Let’s illustrate the difference with an example. A company has only one depreciable asset that was acquired three years ago at a cost of $120,000. The asset is expected to have a useful life of 10 years and no salvage value. The company uses straight-line depreciation on its monthly financial statements. In the asset’s 36th month of service, the monthly income statement will report depreciation expense of $1,000. On the balance sheet dated as of the last day of the 36th month, accumulated depreciation will be reported as $36,000. In the 37th month, the income statement will report $1,000 of depreciation expense. At the end of the 37th month, the balance sheet will report accumulated depreciation of $37,000.
What is the accumulated depreciation that is offset against the fixed asset account?
If a piece of machinery (a fixed asset) costs $100,000, and the machine has an expected useful life of ten years, then, using the straight-line depreciation method, the machine depreciates at a rate of $10,000 a year. (100,000 divided by 10 is 10,000) At the end of the first year, the fixed asset account will show the original cost, but the depreciation account will show $10,000. To know the net value of the asset, the original cost of $100,000 is offset by the $10,000 depreciation, giving a net asset value of $90,000 dollars. At the end of the second year, the fixed asset account will still show the original cost, but the depreciation account will now show $20,000, being the accumulated total of (a) the first year's depreciation, and (b) the second year's depreciation. As the net value of the fixed asset is calculated by deducting the accumulated depreciation from the original cost, the net value will now be $80,000. i.e. $100,00 minus (offset by) the $20,000 accumulated depreciation. As the machine gets older it will be worth less. It's decreasing value, and its decreased value at any point is accounted for by deducting accumulated depreciation to date from the original cost of the fixed asset.
If the adjustment for depreciation for the year is inadvertently omitted will the assets on the balance sheet at the end of the period be understated?
No they will be overstated as depreciation will not have been taken into account.
What do you debit and credit when recording depreciation expense?
There are two ways to record depreciation. With and without using a contra t-account for accumulated depreciation. Example The company buys a machine for 100,000. The residual value is 0 and the expected economic lifetime is 10 years. Using straight line method this results in a yearly depreciation expense of 10,000. Without a contra t-account Depreciation expense machine debit 10,000; machines credit for 10,000. At the end of (say) the third year, machines has a debit value of 70,000. With a contra t-account Depreciation expense machine debit 10,000; accumulated depreciation machines credit for 10,000. At the end of (say) the third year, machines still has a debit value of 100,000. Accumulated depreciation machines has a credit value of 30,000. Jointly they show the net value (or book value) of 70,000, which is the same as when no contra t-account is used.
Is accumulated depreciation a real or temporary account and why?
It's a real account. Easy way to remember it is by remembering the accounting formula. Assets= Liabilities+ Capital- Withdrawals+ Revenue- Expenses Withdrawals, Revenue and Expenses are temporary and get closed at the end of the accounting cycle. Since Accumulated Depreciation falls under the Assets account and is a contra asset
When did The Depreciation Guild end?
The Depreciation Guild ended in 2011.
