What is Depreciation calculation?
What is
Depreciation:
Depreciation Cost is the cost that is allocated over its life and it is charged as an expense. It is the cost that reduces the value of the asset over its useful life. The cost is reduced because of the use, obsolescence, and wear and tear. Depreciation is charged on tangible assets like plants, equipment, machinery, etc. The land is also an asset, but depreciation is not calculated as it is considered to have an unlimited useful life.
The Accounting Treatment:
An adjustment entry is recorded to charge the depreciation cost, and it is recorded by debiting the Depreciation Expense and crediting the Accumulated Depreciation Account. It is presented as under:
Depreciation Expense A/c Dr. Amount
Accumulated Depreciation A/c Cr. Amount
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