Depreciation

sarahwilson

Does anyone have any ways to remember the postings for depreciation. I can work out the figures but I get mixed up with where to put them and cannot seem to find an acronym or anything to help me out!!

Monsoon

Hi Sarah
I don't have an acronym, but I'd suggest finding a type of account you're happy with (eg, that P&L expenses are debits) and use that as your 'anchor' and work out the rest around it.

By depreciation postings, do you just mean Dr Depreciation Expense and Cr Accumulated Depreciation in the Balance Sheet?

Eagle Edu support tutor

E Learning

Hiya

Have you tried the e-learning for depreciation? Here:

http://www.aat.org.uk/elearning/rt_unit5_fra/

Our students are finding these really helpful.

Diannew

Eagle Edu support tutor wrote: »

Hiya

Have you tried the e-learning for depreciation? Here:

http://www.aat.org.uk/elearning/rt_unit5_fra/

Our students are finding these really helpful.

Thank you!! I never knew about e-learning, and have just visited the site, it is so user friendly and explains everything, in a really easy way to understand. I will definatley use this in the future.

The short quizes are really good to test your knowledge of all aspects of accountancy.

Brilliant.

sarahwilson

I didn't know they had short test for unit 5 on the AAT site, thanks for pointing that out.

I am getting stuck with what sits on the balance sheet and what goes in the P&L I think, theres provision for depreciation which I think goes in the BS as a credit and then depreciation expense which I think is P&L as a debit. If its right I don't really know why its right if you know what I mean:blushing:

mehmet

What you should have in mind is what depreciation is doing.

Depreciation is a non-cash expense that reduces the value of an asset as a result of wear and tear, age or obsolescence.

What we are doing when we depreciate an asset is, in effect, accounting for the cost of using that asset (excluding running costs) per accounting period. Assets fall in value over time due to the above mentioned facts (you only have to look at the second hand car market to see this), so we record a depreciation expense (which as you rightly say is a debit in the Profit & Loss account) to account for the fall in value, which may be calculated in any of several methods, such as straight-line or reducing balance, provided that the method is applied consistently.

The corresponding credit entry is made in the accumulated depreciation account, which goes in to the Balance Sheet (you don't see it as a seperate line, instead you deduct it from the asset cost to give you the asset's Net Book Value). This is because what we are saying, in effect, that the value of the asset at the end of the year is equal to the cost less all of the depreciation accounted for thus far.

A-Vic

Diannew wrote: »

Thank you!! I never knew about e-learning, and have just visited the site, it is so user friendly and explains everything, in a really easy way to understand. I will definatley use this in the future.

The short quizes are really good to test your knowledge of all aspects of accountancy.

Brilliant.

The attachments are even better as take you through an exersize :thumbup: