Income Statement Depreciation Of Assets

The depreciable amount of an asset is the cost of an asset or other amount substituted for cost less its residual value.

Income statement depreciation of assets. Depreciation expense is an income statement item. Thus the differences are. The effect of depreciation on income statement reporting a study of united bank for africa uba plc enugu branch abstract. The management and staff of both uba enugu.

The monthly journal entry to record the depreciation will be a debit of 1 000 to the income statement account depreciation expense and a credit of 1 000 to the balance sheet contra asset account accumulated depreciation. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. One expense reported here relates to depreciation. Depreciation is an expense which is charged in the current year s income statement.

1 schedule ii 2 see section 123 useful lives to compute depreciation. This expense is most common in firms with copious amounts of fixed assets. However depreciation is not deducted from non current assets directly. The straight line method of depreciation will result in depreciation of 1 000 per month 120 000 divided by 120 months.

It will go to a great extent in enlightening them on the concept of depreciation and how it affects income statement reporting of uba enugu. In the absence of these assets depreciation doesn t exist as an expense on a firm s income statement. Depreciation is used to account for declines in the value of a fixed asset over time. Physical assets such as machines equipment or vehicles degrade over time and reduce in value incrementally.

The income statement reports all the revenues costs of goods sold and expenses for a firm. Depreciation is instead recorded in a contra asset account namely provision for depreciation or accumulated depreciation. The recommendations from this project work will suggest for other organizations on the best approach to assets depreciation. A depreciation expense reduces net income when the asset s cost is allocated on the income statement.

Accumulated depreciation is a contra account and is paired with the fixed assets line item to arrive at a net fixed asset total. Depreciation on the income statement is for one period while depreciation on the balance sheet is cumulative for all fixed assets still held by an organization. Depreciation expense and accumulated depreciation.