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Journal Entry for Depreciation

Arjun EP

Published on: June 20, 2020

Depreciation on Fixed Assets

All the business organizations purchase fixed assets like building, plant and machinery, furniture, vehicle, equipment etc.

These assets are not purchased for resale.

These assets help to run-on the business smoothly.

These assets also help to generate profit.

After using these assets, their life, working capacity and value will be decreased.

This decrease value is called depreciation.

Depreciation is non-cash expenses.

It is debited in profit and loss account.

Depreciation on Fixed Assets

Depreciation on fixed assets (by name)

To Fixed assets (by name)

(Being- depreciation is charged on ………..)

Depreciation on fixed assets

Name of fixed assets

Increase in expenses

Decrease in assets

Journal Entry

In the book of …………

Date

Particulars

Amount Dr

Amount Cr

Depreciation on fixed assets (by name)

To Fixed assets (by name)

(Being- depreciation is charged on ……………..)

xxxx

Profit and loss account

To Depreciation on fixed assets account

(Being- depreciation transferred to P&L account)

xxxx

Keep in Mind (KIM)

Depreciation is non-cash expenses. Its short form is Depⁿ

Some fixed assets are: Plant and machinery, land and building, furniture and fitting, vehicles, equipment.

Depreciation is not charged on land.

PROBLEM: 18

SK Company (P) Ltd has following extracted transactions on 31^st December:

Depreciation is charged on machinery Rs 20,000.

Depreciation is charged on delivery truck Rs 15,000.

Depreciation is charged on car Rs 12,000.

Depreciation is charged on computers Rs 8,000.

Depreciation is charged on bike Rs 6,000.

Depreciation is charged on furniture valued Rs 5,000 @ 20%.

Depreciation is charged on equipment valued Rs 300,000 life is 5 years.

Required: Journal entries

SOLUTION

Journal Entry for American Style

Date

Debit $

Credit $

Sep, 3

Depreciation account

Machinery account

To record depreciation on machinery

20,000

Journal Entry for European Style

Date

€

Sep, 3

Depreciation account

Machinery account

To record depreciation on machinery

20,000

Journal Entries

In the book of SK Company (P) Ltd

Date	Particulars		LF	Amount Dr	Amount Cr
31 Dec	Depreciation on machinery account To Machinery account (Being- depreciation charged on machinery)	Dr		20,000	20,000
31 Dec	Depreciation on delivery truck account To Delivery truck account (Being- depreciation charged on delivery truck)	Dr		15,000	15,000
31 Dec	Depreciation car account To Car account (Being- depreciation charged on car)	Dr		12,000	12,000
31 Dec	Depreciation on computer account To Computer (Being- depreciation charged on computer)	Dr		8,000	8,000
31 Dec	Depreciation on bike account To Bike account (Being- depreciation charged on bike)	Dr		6,000	6,000
31 Dec	Depreciation on furniture account To Furniture account (Being- depreciation charged on furniture 5,000@20%)	Dr		1,000	1,000
31 Dec	Depreciation on equipment account To Equipment account (Being- depn charged on equipment 300,000 ÷ 5 years)	Dr		60,000	60,000