How to track depreciation?

[Doug Laidlaw]

It may depend on the accounting conventions used in your country, but the 
method used in Australia is as follows:

Depreciation is usually calculated at the rate allowed by our Taxation office, 
but if a realistic rate is different, you could probably modify the 
procedure.

When preparing end-of-year reports, we do a journal, crediting "Provision for 
Depreciation" and debiting "Depreciation Expense"  There can be one Provision 
account for each asset if you prefer.

The balance of "Depreciation Expense" is transferred to Profit and Loss.  The 
Provision is shown in the Balance Sheet against the value of the asset, but 
kept distinct, thus:

Plant and Equipment:				$100,000.00
	Less Provision for Depreciation	     5,000.00
							___________		95,000.00

If an asset is sold, the actual sale price is compared with the book figure, 
and the difference is either income or a further deduction.

In the books for the following financial period, the balance of the Provision 
account is brought down.

HTH,

Doug.


On Tue, 25 Oct 2005 8:56 am, John R. Sowden wrote:
> 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
> > >
> > > _______________________________________________
> > > gnucash-user mailing list
> > > gnucash-user at gnucash.org
> > > https://lists.gnucash.org/mailman/listinfo/gnucash-user
>
> 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)

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