In this case, we can make the journal entry of depreciation expenses in the June 30 adjusting entry as below: Account Debit Credit Depreciation expense 45 Accumulated depreciation 45 With the information in the example above, we can calculate the monthly depreciation expense as below:ĭepreciation expense = ($1,770 – $150) / (3 x 12) = $45 per month What is the journal entry for the computer’s depreciation expense in the June 30 adjusting entry? ABC uses the straight-line depreciation method for the computer. The computer’s estimated useful life is 3 years with a salvage value of $150. buys and makes a proper record of a $1,770 computer for office use and it is put to use immediately after the purchase. Exampleįor example, on June 01, 2020, the company ABC Ltd. In this case, the depreciation expense should match the economic benefit that the asset brings to the company.
In other words, the net fixed asset value is zero when that time comes.ĭepreciation expense is an income statement item that represents the expense that incurs as the company uses the asset during the accounting period. Likewise, when a fixed asset is fully depreciated, the accumulated depreciation of that asset equals its total cost. It is a balance sheet item which its normal balance is on the credit side. Account Debit Credit Depreciation expense 000 Accumulated depreciation 000Īccumulated depreciation is a contra account to fixed assets. The company can make depreciation expense journal entry by debiting the depreciation expense account and crediting the accumulated depreciation account. At the same time, it is to recognize the expense that incurs with the usage of the asset during the period. However, whichever method is used, the depreciation expense should match with the benefits that the assets provide to the company over the periods of time.Īt the end of the accounting period, the journal entry of depreciation expense is necessary for the company to have the actual net book value of total assets on the balance sheet. Hence, it can only estimate the amount of depreciation expenses during the period by using various depreciation methods. The company usually cannot tell exactly how long the asset will be used. Hence, the company needs to make proper journal entry for the depreciation expense at the period-end adjusting entry. Likewise, depreciation expense represents the cost that incurs during the period as the company uses the asset in the business. Depreciation Expense Journal Entry Overviewĭepreciation is an allocation of the cost of tangible assets over its estimated useful life.
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