What is the Journal Entry for Depreciation?

Journal Entry for Depreciation

The reduction in value of an asset due to normal usage, wear and tear, new technology or unfavorable market conditions is called Depreciation. Assets such as plant and machinery, buildings, vehicles etc. which are expected to last more than one year, but not for the infinity are subject to depreciation.

 

Journal entry for depreciation 

 Depreciation A/C  Debit
   To Asset A/C  Credit

(Assuming no provision is maintained)

 

Rules applied in the above journal entry

  • Depreciation – Nominal Account – Dr. All expenses & losses
  • Asset – Real Account – Cr. What goes out

 

To Transfer Depreciation into P&L

 Profit & Loss A/C  Debit
   To Depreciation A/C  Credit

 

 

Example

Let’s assume that a piece of machinery worth 1,00,000 is charged depreciation at 10%. The journal entry will be

 Depreciation A/C  10,000
   To Machinery A/C  10,000

 

 

To Transfer it to the Income Statement

 Profit & Loss A/C  10,000
   To Depreciation on Machinery A/C  10,000

 

 

Relevant & Related Accounting Topics