Have a quick accounting question.

[fuzzybabybunny]

On the depreciation adjusting entry for the end of the month I have to

Debit Depreciation Expense
Credit Accumulated Depreciation

In class all we've done is depreciate one thing, say a mower in the Equipment asset account.

What do you do when you have to depreciate two things in the Equipment asset account, but both of those "things" is called "mowing equipment"?

Equipment A Depreciation: $1000
Equipment B Depreciation: $1500

Can I just lump together depreciation like this:

Jan-31
Debit Depreciation Expense: $2500
Credit Accumulated Depreciation: $2500
Comment: Depreciate Mowing Equipment

or do I have to do each equipment by itself:

Jan-31
Debit Depreciation Expense: $1000
Credit Accumulated Depreciation: $1000
Comment: Depreciate Mowing Equipment

Jan-31
Debit Depreciation Expense: $1500
Credit Accumulated Depreciation: $1500
Comment: Depreciate Mowing Equipment

 

[gopunk]

i have no clue, but if i had to guess it would be to do it separately.

 

[fuzzybabybunny]

Originally posted by: gopunk
i have no clue, but if i had to guess it would be to do it separately.

Thanks. I'm leaning towards that conclusion also. Just seems... safer.

 

[fuzzybabybunny]

Gosh, I'm not sure anymore.

Both of the equipment things are simply classified as "mowing equipment."

OP has been edited.

 

[BrunoPuntzJones]

Yeah the first one, just lump it one entry. If you had 1000 truck trailers it'd be a bitch to do each one. It's just a single entry, even if you are hitting seperate accounts like:

Mowing Equipment 1000
Truck Equipment 1000
Accumulated Depreciation 2000

 

[fuzzybabybunny]

Originally posted by: BrunoPuntzJones
Yeah the first one, just lump it one entry. If you had 1000 truck trailers it'd be a bitch to do each one. It's just a single entry, even if you are hitting seperate accounts like:

Mowing Equipment 1000
Truck Equipment 1000
Accumulated Depreciation 2000

Cool. Thanks!

 

[Sphexi]

It depends, most times you can do it together in one entry, if the equipment was purchased together and then depreciated by straight-line, rather than by usage. Some companies want really detailed tracking/entries for depreciation, mostly rental places, so they'll have an entire account book just for equipment depreciation, and they'll do it individually by usage (hours or miles or whatever), then show the entire depreciation each day/month/quarter/year in their main books with a note to see the depreciation book.

But yeah, just do it as a lump sum ...if anyone asks how you'd know what depreciated by how much, just say that a seperate account is kept for that information.

 

[krunchykrome]

Accumulated Depreciation is a contra asset, meaning it is attatched to a certain account. Each asset that depreciates has an accumulated depreciation contra asset.

If you have two assets, both depreciating, you can combine both depreciation expenses into one expense entry, however, the accumulated depreciation needs to be broken out since they each go with a different asset.

For example:

You have:
Truck Depreciation of $1000
Copy Machine Depreciation of $100

The entry would look like this:

Depreciation Expense $1100
.............................................Accumulated Depreciation; Truck $1000
.............................................Accumulated Depreciation; copy machine $100

 

[Triforceofcourage]

I would seperate them, always good to have an audit trail for the depreciation of each asset.

 

[krunchykrome]

Originally posted by: Triforceofcourage
I would seperate them, always good to have an audit trail for the depreciation of each asset.

Separate what? The expense entry or the accumulated depreciation entry?

 

[Fern]

Originally posted by: krunchykrome
Accumulated Depreciation is a contra asset, meaning it is attatched to a certain account. Each asset that depreciates has an accumulated depreciation contra asset.

If you have two assets, both depreciating, you can combine both depreciation expenses into one expense entry, however, the accumulated depreciation needs to be broken out since they each go with a different asset.

For example:

You have:
Truck Depreciation of $1000
Copy Machine Depreciation of $100

The entry would look like this:

Depreciation Expense $1100
.............................................Accumulated Depreciation; Truck $1000
.............................................Accumulated Depreciation; copy machine $100

Yes, that's the way generally we do it.

It is necessary to keep up with each asset's individual amount of depreciation in the event it is sold. The amount of accum depreciation must be known so that any gain or loss on its disposition can be properly calculated.

If the client company has a large amount of depreciable assets, we use programs to assist with the calc of depreciation & keeping track of each asset.

I think, however, if there were a large of number of assets it would acceptable (and is probrably practiced) to aggregate similar assets together and do "lump sum" entries.

Fern

 

[JS80]

In real life, the Fixed Asset system does it line item for you.

 

[krunchykrome]

Originally posted by: JS80
In real life, the Fixed Asset system does it line item for you.

I dont think they have a fixed asset system in his class :roll: