Double entry records for depreciation

When a business purchases fixed assets, the cost price

is recorded in the respective fixed asset account. Any

depreciation subsequently charged on that asset is

recorded separately in a provision for depreciation

account where the depreciation charge accumulates

each year.

Double entry records for depreciation

Example:A business purchases machinery for use in their workshop for £2,000 on January 2001. the company uses the reducing balance method of depreciation at a rate of 20% per annum, their year end is 31 December

Cost of machinery

First year depreciation

Second year

depreciation

Third year depreciation

Net book value

£

_____

_____

_____

_____

_____

Double entry records for depreciation

Example:A business purchases machinery for use in their workshop for £2,000 on January 2001. The company uses the reducing balance method of depreciation at a rate of 20% per annum, their year end is 31 December

Machinery AccountDr Cr

Provision for depreciation AccountDr Cr

Jan1 2001 Cash 2,000Jan1 2002 Balance b/d 2,000Jan1 2003 Balance b/d 2,000Jan1 2004 Balance b/d 2,000

Dec31 2001 Balance c/d 2,000Dec31 2002 Balance c/d 2,000Dec31 2003 Balance c/d 2,000

Dec31 2001 Balance c/d 400Dec31 2002 Balance c/d 720Dec31 2003 Balance c/d 976

976

Dec31 2001 P&L a/c 400Dec31 2002 P&L a/c 320Dec31 2003 P&L a/c 256Jan1 2004 Balance b/d 976

?£

?£

?£

?£