Accounting for Depreciation

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 Accounting for a Truck Purchase
Journal
Debit Credit
Purchase a truck for $26,000 cash
Vehicle 26,000
Cash 26,000

Ledger
Cash Vehicle
26,000 26,000

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 Accounting for Depreciation

Straight Line Depreciation

$26,000 cost - $2,000 residual value = $24,000

$24,000 divided by 4 years = $6,000 depreciation

expense per year

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 Accounting for Depreciation
Record depreciation for a Truck Journal
Debit Credit
Costing $32,000
Depreciation Expense 6,000
Estimated life 5 years 6,000
Accumulated Depreciation
Residual value $2,000

Ledger
Depreciation Expense Accumulated Depreciation Contra Asset
6,000 6,000

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 Book Value

After One Year

$26,000 cost minus $6,000 accumulated depreciation = $20,000 book value

After Two Years

$26,000 cost minus $12,000 accumulated depreciation = $14,000 book value

After Three Years

$26,000 cost minus $18,000 accumulated depreciation = $8,000 book value

After Four Years

$26,000 cost minus $24,000 accumulated depreciation = $2,000 book value

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 Accounting for Depreciation
How to Show the Vehicle, Accumulated Depreciation
and Depreciation Expense Income Statement
For the Year Ending Dec 31, 200X

in the Financial Statements: Sales $22,700

Expenses:
Depreciation Expense 6,000
Supply Expense 200
Rent Expense 6,600
Wage Expense 3,100
Interest Expense 1,200
Utility Expense 600
Bad Debt Expense 800
Tax Expense 1,500
Total Expense 20,000
Net Income $2,700

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Accounting for Gain/Loss on the Sale of a Long Term Asset

Journal
Debit Credit

Cash 22,000
Accumulated Depreciation 6,000
Vehicle 26,000
Gain on Sale of Vehicle 2,000

Ledger
Vehicle Accumulated Depreciation
26,000 26,000 6,000 6,000
0 Revenue Account
0
Cash Gain on Sale of Vehicle
22,000 2,000

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 Accounting for Amortization
Journal
Debit Credit

Patent 32,000
Cash 32,000
Amortization Expense 4,000
Accumulated Depreciation 4,000

Ledger
Patent Accumulated Amortization

32,000 4,000

Cash Amortization Expense

32,000 4,000

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