How to track depreciation?

John R. Sowden jsowden at americansentry.net
Mon Oct 24 18:56:25 EDT 2005


On Mon October 24 2005 06:01, Derek Atkins wrote:
> Sorry, there /could/ be income involved..  I am not an accountant,
> so I /do/ sometimes get this wrong.  ;)   You are correct that
> there probably is not any Income, it's just an asset transfer.
>
> -derek
>
> marc at osmium.mv.net writes:
> > Hello Derek -
> >
> > Thanks for the follow up. What you say makes sense to me, with one
> > curiosity. The "Income:Auto Sale" bothers me, to some extent, in that I
> > don't personally believe that any "Income" occured. It is really an asset
> > transfer from a physical asset to a cash asset, isn't it? So to that end,
> > the split would be between Equity and Assets, correct?
> >
> > Thanks in advance - Marc
> >
> > On Fri, 30 Sep 2005, Derek Atkins wrote:
> >> If you're not a business then technically you can't depreciate the
> >> car.  When you sell the car, you create a split transaction.  In
> >> the asset you reduce by the full (original) value of the car, then
> >> the sale value goes into Income:Auto Sale, and then rest goes into
> >> Equity:Capital Depreciation.  I don't think you can count is as a
> >> capital loss.
> >>
> >> Maybe an accountant will chime in?
> >>
> >> -derek
> >>
> >> marc at osmium.mv.net writes:
> >>> Hello -
> >>>
> >>> I own a car, which when I purchased it, I transferred the monies used
> >>> to pay for it from my checking account to an asset account "car".
> >>> Several years have past, and now it is time to sell the car. The amount
> >>> I will receive for the car will be significantly less than what I paid.
> >>> My questions are:
> >>>
> >>> 1) Should I have been tracking depreciation on some regular basis over
> >>>    the past years, to properly reflect its current value in net-worth
> >>>    statements? If so, how is that done?
> >>>
> >>> 2) Now that the car will be sold, how should I account for the money
> >>> that I receive (I presume it isn't income), and how do I account for
> >>> the difference of sold-value versus asset value on the books?
> >>>
> >>> I presume that the above questions are general, in that they are true
> >>> for all assets that are tracked and/or later sold (at profit or loss).
> >>
> >> --
> >>       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> >>       Member, MIT Student Information Processing Board  (SIPB)
> >>       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
> >>       warlord at MIT.EDU                        PGP key available
> >
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If you had a 10,000 vehicle that you depreciated over 5 years at 1,800 per 
yeat (150/mo), leaving 1000 for salvage value, the accumulated depreciation 
account would have 9,000 in it, leaving a book value of !,0000.

If you were to look in the clasified for a year 2000 similiar vehicle, it 
might have a market value of 4,000, so if you were to sell yours for 4,000. 
you would have the following ledger entries:

Account             DR         CR
Cash                4,000.                (this is the cash coming in the
                                                   door)
Other Income                 3,000.   (not from operations)

Accum Deprec   9,000.               (this zeros out the accum deprec)
Asset Vehicle               10,000.  (this gets it off your books)

-- 
John R. Sowden
AMERICAN SENTRY SYSTEMS, INC.
Residential & Commercial Alarm Service
UL Listed Central Station
Serving the San Francisco Bay Area Since 1967
mail at americansentry.net
www.americansentry.net


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