All equipment owned by a business should be listed on the corporation's income tax return each year. This page of the report is called the Depreciation Schedule. Each year the taxpayer should report any new equipment purchased and also tell his accountant which items of equipment were sold or disposed of by the owner.
The corporation's accountant increases the depreciation each year to offset income and thereby reduce taxes. The depreciation amount taken each year is usually higher than the actual physical depreciation occurring due to weather and use.
To determine the accumulated depreciation on a piece of equipment, look at the last tax return available to see what the number is on the Depreciation Schedule. The actual value of the equipment sold will be higher than the Purchase Price New minus the Accumulated Depreciation. A good rule of thumb would be to add back 1/2 of the accumulated depreciation to get a ball-park idea of the fair market value. Better yet - have the equipment appraised by a Certified Machinery & Equipment Appraiser (CMEA). For more information on this subject, go to www.nebbinstitute.org. An interesting and helpful article on farm equipment that discusses depreciation, recaptured depreciation and capital gains tax related to the sale of equipment can be found at www.extension.iastate.edu/Publications/PM1450.pdf.
Paul Klinge, CBI, CBC, CSBA
The Lincoln Group, Inc.
Waverly, Iowa
319-352-0132
Business Transfer Specialists
Mergers & Acquisitions
Business Valuations
Machinery & Equipment Appraisals
the normal balance of accumulated depreciation is "credit"
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.
The accumulated depreciation relating to the piece of equipment will be eliminated from the accounts when the company disposes of the asset. The double entry for the sale of a piece of equipment would be-DR Cash/Bank (with the proceeds)DR Accumulated depreciation (with the total depreciation held for that asset)CR Equipment (with the original cost of the equipment)DR/CR Profit/loss on disposal (with the difference between the proceeds and the NBV of the asset at the time of sale).
12%
Contra assets are asset accounts with creditbalances. (A credit balance in an asset account is contrary-or contra-to an asset account's usual debit balance.) Examples of contra asset accounts include: * Allowance for Doubtful Accounts * Accumulated Depreciation-Land Improvements * Accumulated Depreciation-Buildings * Accumulated Depreciation-Equipment * Accumulated Depletion * Etc. source: http://www.accountingcoach.com/online-accounting-course/05Xpg01.html -- amir
Debit depreciation accountCredit accumulated depreciation
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
Accumulated depreciation and depreciation are related with each other as depreciation is annual expense while accumulated depreciation is the sum of all annual depreciation expenses.
The accumulated deprecation is the all the depreciation amounts should be the accumulated depreciation.
[Debit] Depreciation account [Credit] Accumulated depreciation
if a business produces and sells machinery, then machinery sold is income. The working machinery a business possesses which is used in producing a product are assets. ------------------------------------------------------------ General Journal Entries Manufacturer /Dealer: Dr Bank/ Accounts Recievable X Dr Cost of Sales Y Cr Sales X Cr Inventory Y Normal: Dr Bank/ Accounts Recieveable Dr Accumulated Depreciation on Machinery Cr PPE: Machinery Cr Profit on Sale of Machinery or Dr Loss on Sale of Machinery
[Debit] Depreciation expense[Credit] Accumulated depreciationAfter that depreciation is shown as part of income statement while accumulated depreciation goes to balance sheet.
No. Accumulated depreciation is depreciation accumulated every year and it will only increase and won't decrease. Depreciation expenses is incurred every year.
the normal balance of accumulated depreciation is "credit"
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.
When the asset is disposed of the Accumulated Depreciation is subtracted from the cost of the asset. Journal Entries: If Sold at a Profit: Dr Accumulated Depreciation (All Depreciation) Dr Bank/ Recievable (Amount received for Asset) Cr Asset (Carrying Value on Balance Sheet) Cr Profit on Asset Disposal (Balancing Figure) If Sold at a Loss: Dr Accumulated Depreciation (All Depreciation) Dr Bank/ Recievable (Amount received for Asset) Dr Loss on Asset Disposal (Balancing Figure) Cr Asset (Carrying Value on Balance Sheet) Please note there may also be current year depreciation
accumulated depreciation is an asset, so it will increase with a debit.