Task 5: Record depreciation
If you depreciate your assets at the end of the fiscal year, make this step a part of your end-of-year routine. Consult your tax adviser or accountant for information on when to depreciate your assets.
Create a new asset account for each type of asset you depreciate. Add the words ‘Accum Dep’ (for Accumulated Depreciation) at the end of each new account name. Give the new account a number that allows it to come directly after its corresponding asset account in the accounts list. In the following example, we have a header account, Office Equipment numbered 1‑3100, and a detail account Office Equipment Original Cost numbered 1‑3110. We have created a new asset account called Office Equipment Accum Dep numbered 1‑3120. Notice that the header account shows the current book value of the office equipment.
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Create a new expense account. You may want to call it Depreciation.
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Once you’ve determined your depreciation amounts, make journal entries to credit the new accumulated depreciation asset accounts (for example, Office Equipment Accum Dep) and debit the new depreciation expense account. The accumulated depreciation asset accounts will always have a negative balance to show a reduction in the value of the depreciable assets.
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