Accounting entries
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Contents |
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Depreciation
| Account Description | Debit | Credit |
|---|---|---|
| Depreciation Expense | $1,000 | |
| Accumulated Depreciation | $1,000 |
- This entry has the effect of recording an expense by charging the depreciation account. This charge is then included as one of the operating expenses of the business. The credit is to the Accumulated Depreciation (AD) account. The AD account is carried to the balance sheet andis deducted from the fixed asset total, thereby reporting both the cost of the fixed asset and the accumulated depreciation to date.
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Notes Payable
| Account Description | Debit | Credit |
|---|---|---|
| Cash | $1,500 | |
| Notes Payable | $1,500 |
- Obligations in the form of a written promissory note.
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Sale of Assets
| Account Description | Debit | Credit |
|---|---|---|
| Cash | $9,000 | |
| Accumulated Depreciation | $7,500 | |
| Asset | $14,500 | |
| Gain on Disposal of Assets | $2,000 |
- Assets may be retired voluntarily or disposed of by sale, exchange or involuntary conversion. Normally the disposal of an asset results in a 'book' gain or loss because depreciation is a process of cost allocation and not a process of valuation. The above example reports a gain due to the the estimation of the deprecation being overstanded as compared to the actual decline of the assets fair market value.
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