It is assumed that long lived tangible assets reduce in value over time. This reduction in value is hard to quantify economically, but is an acceptable reduction in income when calculating income tax. This reduction in value due to use or age of a long lived asset is called depreciation. The reduction or offset against income is called depreciation expense. Usually this is not an expense that requires the immediate expenditure of cash, but is called a non-cash expense deducted from income before calculating income tax. Generally the depreciation expense amounts are calculated from formulas promulgated by tax regulators to either model actual economic depreciation, or to motivate certain economic behaviors by allowing favorable tax treatment for the favored activities.
An expense.
Neither. Depreciation is a non-cash expense.
Debit is to depreciation expense.
[Debit] Depreciation expense[credit] fixed asset.
Depreciation expense can be allocated to Administrative Expense or Selling & Marketing Expense or even to Cost Of Goods Sold. The amount of allocation and how that is done is specific to the type of business or industry.
Depreciation expense is neither an asset or liability. It is an expense.
is depreciation expense a non-cash expense
An expense.
Using accumulated depreciation and depreciation expense is a way that businesses can realize the true value of assets. A piece of equipment, for example, is devalued every year by the process of amortizing the asset. This in turn is recorded as depreciation and depreciation expense.
Neither. Depreciation is a non-cash expense.
Debit is to depreciation expense.
selling 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.
Depreciation expenses is for one specific fiscal year while accumulated depreciation is the sum of all depreciation expenses that’s why accumulated depreciation exceeds the depreciation if there is depreciation expense in prior year as well.
Examples of operating expense ==> depreciation expense of a machine, impairment of goodwill Example of selling expense ==> advertising Example of general administrative expense ==> office expense
Method 1 1 - [Debit] Depreciation Expense xxxx [Credit] Asset account xxxx Method 2 1 - [Debit] Depreciation Expense xxxx [Credit] Accumulated Depreciation xxxx 2 - [Debit] Accumulated Depreciation xxxx [Credit] Asset Account xxxx
[Debit] Depreciation expense[credit] fixed asset.