Depreciation in Matching Concept of Accounting: The main reason for charging depreciation is concerned with the “matching concept” which states that while preparing the income statement, revenues of the business are matched with the related expenses incurred in earning these revenues. Accumulated depreciation has to do with determining the current net worth of a given asset. It is a contra-account, meaning it reduces the value of an asset account. On March 5, 2016, motor vehicle number 026 was sold for $8,400. Depreciation charged on revalued assets and depreciation charged on historical cost must be different. Accumulated depreciation is the sum of depreciation expense over the years. As part of the process of calculating the accumulated depreciation for an asset or a group of assets, it is necessary to take several factors into consideration, ranging from the original purchase price to the current level of return on the investment. Accumulated depreciation helps to understand the total depreciation in running the fixed asset from its acquisition asset to its disposition asset. You take the depreciation for all capital assets for the current year and add to the accumulated depreciation on those assets for previous years to get the current year's accumulated depreciation on your business balance sheet. For instance, a widget-making machine is said to "depreciate" when it produces less widgets one year compared to the year before it, or a car is said to "depreciate" in value after a fender bender or the discovery of a faulty transmission. Each accounting period, you make an accumulated depreciation journal entry, adding to the total depreciation over time. These are called intangible assets, and the accounts that track them include: In other words, while the price of a machine is listed as an asset, accumulated depreciation has a credit balance which increases over time, and therefore offsets the cost of the asset. on cost. Another distinction between them is that cash are current assets while accumulated depreciation are non current assets. When disposing of a plant asset, a company must remove both the asset’s cost and accumulated depreciation from the accounts. However, the depreciation of assets is not undertaken purely to show market value for non-current assets. Depreciation is listed as a contra account on a company’s balance sheet.. To record depreciation expense, a corporate accountant debits the depreciation expense account and credits the accumulated depreciation account. Accumulated depreciation will be the total of depreciation expense from 1 st March 2017 till date. Accumulated depreciation is the total depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use. It can get by comparing the depreciation taken on the assets by its crying cost. Accumulated depreciation is restated proportionately with the change in the gross carrying amount of the asset such that the net book value of the asset after revaluation equals its revalued amount. It is a contra-account to the relevant fixed asset cost account. Depreciation is an expense which is charged in the current year’s income statement; however, depreciation is not deducted from non-current assets directly. Depreciation. This isn’t the case, however. 2. i am not sure if we created a proper depreciation account for each Fixed Asset/type, hence i want the steps to create and step to record the accumulated depreciation ,so the effect will take place . The account Accumulated Depreciation reports the total amount of depreciation expense that has been recorded from the time the asset was put into service until the date of the balance sheet. The useful lifespan of an asset can range from three to 20 years for personal property, 15 to 20 years for land improvements, and are fixed at 27.5 years for residential real estate and 39 years for business real estate. When this asset is to be sold or is obsolete, the total amount lying in the books of Accumulated depreciation is reversed along with the original cost of the asset, thereby eliminating all record of the asset from the balance sheet of the company. The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account); this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported. 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