Depreciation

[ghaverla@freenet.edmonton.ab.ca]

On Mon, 19 Mar 2001, Carol Champagne wrote:
> ghaverla@freenet.edmonton.ab.ca wrote:
> 
> > How does one combine an capital account, and the 3 
> > depreciation accounts (accumulation, asset and expense)
> > to track how capital purchases depreciate?  The manual
> > mentions the 4 accounts, but I can't see how there
> > is an example anywhere of how this works.
> 
> I think the 4 types of GnuCash accounts you need are:
> Cash or Bank (for the money to buy the asset)

I would label this "Owner Equity"?  And for the near
term it will always be negative?

> Asset (for the asset you are purchasing)
> Asset (for the accumulated depreciation)
> Expense (for the yearly depreciation expense)

And these are the 3 accounts mentioned in the GnuCash
"manual"?

> According to my accounting textbook, this is what you do:
> 
> 1. Buy the asset:
> 
> Dr. Asset (purchase price)  $10000

Dr == ?  Debit?

>       Cr. Cash (or Bank)             $10000

> from the asset balance to get the asset's book value.  Each year the 
> balance of the accum. dep. account increases until the end of the 
> asset's useful life. At that point, the asset's book value is
> called its salvage value (amount it's worth at the end of its life).
> 
> In the example above, I buy an asset for $10000 and estimate its
> salvage value at $1000.  The asset has a 5-year life, so the 

Should (how?) a person track this salvage value year to
year?

> straight-line dep. is (10000 - 1000)/5 = 1800. At the end of the

I live in Canada.  Nothing is that easy.  :-)  We can only
depreciate half of what we should in the first year, and
thereafter it is a geometric depreciation.  Rate depends
on asset "class".

> 3. Sale of asset at a gain
> If you sell the asset at a gain, you need an additional account for the 
> gain:

This loss or gain goes in yet another account?  So, we
actually need 5 (or 6?) accounts to track depreciation?
Oh boy!  Lots of things to remember.

I might actually be able to provide a template of all
this stuff after I am done.  Would that be of use to
the project?

Gord

Matter Realisations     http://www.materialisations.com/
Gordon Haverland, B.Sc. M.Eng. President
101  9504 182 St. NW    Edmonton, AB, CA  T5T 3A7
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