Depreciation

[Carol Champagne]

ghaverla@freenet.edmonton.ab.ca wrote:

 
> Okay, I gave this Account a name of "Owner Equity", and it
> is of type "bank".  It's description is
>  "bank" to get loans from
> When I want to purchase something, I make a withdrawal
> from the bank and transfer it to Capital:Additions.  In
> the Description field I put what it is I am purchasing.
> (Note, as far as the additions and accumulations accounts
> goes, it looks to me like you actually need one of these
> for each class of depreciation schedule you use.)
> 

> At the end of a calendar (or fiscal) year, I transfer
> half of the balance of this additions account to my
> accumulations account.  I then depreciate the partially
> totalled accumulations file and transfer that amount
> to my depreciation expense account.  I then go back to
> my additions file and transfer the remaining balance
> to the accumulations file.  As long as I continue to
> increment the line number for these transactions on the
> last day of the year, it looks like everything comes
> out as it should (sort order is date first, then
> number?).
> 
> I haven't adjusted any preferences from the Debian
> defaults.  Maybe I am not supposed to make withdrawals
> from the owner equity bank, but I understand what is
> happening.
> 
> Does my explanation of what I did look like it agrees
> with accepted practice?
> 
I'm not sure---might be a good thing to run by that accountant.

It sounds like your Capital:Additions is one big asset account
where you track all large purchases.  From what I've read, the
way to do this would be:

1)Transfer money from bank account to capital:additions (asset) account 
to purchase the item.
2)At the end of the year, transfer the depreciation amount from
the accumulations (asset) account to the depreciation expense account. 
This will cause you to have a negative balance in the accumulations
account.
3) The amount you entered in the capital:additions account
stays the same year to year until you sell the asset.  The negative 
balance in the accumulations account increases every year to offset
the positive balance of the capital:additions account.  So the
balance sheet report shows the original cost of the asset and
the accumulated depreciation:

Capital Additions        10K
      Less accum. dep    < 2K>
                         -----
                                    8K

This is my understanding of how dep. is supposed to work from
the texts I have, but an accountant should be able to clarify this....


> The workbook I am leaning on to set up GnuCash looks like
> I should set up the Capital Gain as a special "distribution"
> sub-account of Income, and likewise a loss would be a
> special subaccount of a General Expense.
 Sounds right.

 Carol Champagne