Depreciation Income Statement Sample

A company acquires a machine that costs 60 000 and which has a useful life of five years.

Depreciation income statement sample. At the end of each accounting period the balance from the depreciation expense account is moved to the accumulated depreciation account and the depreciation expense account will eventually begin the new accounting period with a zero balance. The depreciation expense account is a part of the income statement and it is a temporary account. Property plant and equipment are depreciated because of wear and tear usage obsolescence or simply by passage of time. The depreciation reported on the income statement is the amount of depreciation expense that is appropriate for the period of time indicated in the heading of the income statement.

Example of depreciation usage on the income statement and balance sheet. At the end of the tax year we will depreciate one fifth or 20 of the asset s value. Depreciation on the income statement. Termination benefits are also charged to the statement of income.

On the other hand intangible assets are amortised. Amortisation is the equivalent of depreciation for intangible. Depreciation and amortisation expenses. This means that it must depreciate the machine at the rate of 1 000 per month.

10 000 x 2 2 000. Here is an example of how to prepare an income statement from paul s adjusted trial balance in our earlier accounting cycle examples. On january 1st we purchase equipment for 10 000 and its useful life is 5 years. As you can see this example income statement is a single step statement because it only lists expenses in one main category.

In this research work titled the effect of depreciation on the income statement of with particular reference to united bank for africa uba plc. If the machine generated no revenue for the next year and the company s earnings were exactly the same it would report the 1 500 depreciation on the income statement under depreciation expenses and reduce net income to 7 000 8 500 earnings minus 1 500 depreciation. Let s look at an example of depreciation using the simple straight line method of depreciation.