What is the correct double entry to record the depreciation charge in a period ?

1. Dr. Depreciation Expense.

     Cr. Accumulated Depreciation.

Debit depreciation and credit depreciation reserve or accumulated depreciation and such a depreciation for the current period is a charge to Profit and Loss account.

The answer is number 1 ishaallah

Depreciation expense Dr Accumulated dep. Cr.

dr. depreciation cr. accumulated depreciation

Two methods are normally used to record the depreciation in the books. These are:

1.Depreciation account - no provision for depreciation account is maintained

2.Accumulated depreciation account - provision for depreciation account is maintained

 

These methods have been explained below:

 

1.Depreciation Account - No Provision for Depreciation Account is Maintained:

 

Under this method, depreciation account is debited and asset account is credited with the amount of annual depreciation.

 

Example:

Suppose, the cost of a machine is $1,000 and its depreciation is 10% p.a. The entries to record the depreciation will be:

 

Journal Entries

 

Depreciation a/cDr.100 

     Machinery a/c 100

(Being depreciation charged on machinery @10% p.a.)  

________________________________________  

Profit and loss a/cDr.100 

     Depreciation a/c 100

(Being transfer of depreciation)  

 

 

2.Accumulated Depreciation Account - Provision for Depreciation Account is Maintained:

 

This method involves maintaining each fixed asset at its cost in the ledger account while operating another ledger account where the depreciation to date is recorded. This account is known as accumulated provision for depreciation account, often shortened to the accumulated depreciation account (or sometimes, confusingly, known as the provision for depreciation account).

 

The depreciation is posted directly into the cumulative provision for depreciation account. The double entry to record the depreciation is as follows:

Debit the profit and loss a/c

     Credit the accumulated depreciation a/c

 

depreciation a/c dr to fixed asset a/c

Depreciation of Vehicles Dr. (Indirect Expenses-PNL) Accumulated Depreciation of Vehicles Cr. (Under Fixed Assets-Balance Sheet)