How to track depreciation?

[Mark Johnson]

David Harrison wrote:

>
> I hope not to confuse the issue more, but true depreciation (more 
> correctly called amortization now) isn't meant to write the asset down 
> to reflect it's value.  It is, rather, the matching of expenses to 
> revenue. To get even deeper into it, you have to ask the question, 
> what is the difference between expenses and capital assets?  Expenses 
> are items purchased in order to generate income in the current year.  
> Assets are items purchased to generate income in the current year and 
> in future years.  So in order to properly reflect the expenses 
> associated with the revenue generated in any given year, you amortize 
> the capital assets in a manner that matches the revenue they generate.
>
> Now, I know you're going to argue that my explanation is from a 
> business perspective, but you are keeping books for your own personal 
> non-business activities, and you're right.  From a personal 
> perspective, what I want to know in regards to my assets is what are 
> they worth.  What I would do in that case is record depreciation in a 
> manner that reflects the value of the asset at a particular time.  For 
> example, for my car I might look up the blue book value of it at the 
> end of the year and record depreciation to make the net book value 
> (cost less accumulated depreciation) equal the blue book value.
>
> This method works fine for assets that depreciate, like cars and 
> computers.  But, what about my house, or another asset that goes up in 
> value?  Would you then record "negative depreciation"?  If you are 
> recording depreciation for your car, then I would argue that you should.
>
> I trust I haven't confused the issue more ;)

I don't think you've confused it.  In fact, thanks for the information.

>
> -- 
> David Harrison, BAccS, CGA