The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
What is the entry to remove equipment that is sold before it is fully depreciated? Entries To Record a Sale of Equipment When equipment that is used in a business is disposed of (sold) for cash before it is fully...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
Depreciation(Quick Test #1) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business,...
What is a noncash expense? Definition of a Noncash Expense A noncash expense is an expense that is reported on the income statement of the current accounting period, but the related cash payment took place in another...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
What is the accounting journal entry for depreciation? Definition of Journal Entry for Depreciation The journal entry for depreciation is: Debit to the income statement account Depreciation Expense Credit to the balance...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods sold...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
Is the sale of a plant asset recorded in the sales account? Definition of Sale of a Plant Asset The sale of a plant asset is often the disposal of a company’s equipment (or other asset) that had been used in the...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
What are the effects of depreciation? Definition of Depreciation Depreciation is the systematic allocation of the cost of a company’s assets used in its business from the balance sheet to the income statement (as an...
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
The depreciation computed for financial reporting purposes—as opposed to income tax depreciation. To learn more, see Explanation of Depreciation.
This is a contra long-term asset account which is credited for the depreciation associated with Buildings. Since it is a balance sheet account, the accumulated depreciation account balance does not close at the end of...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
Depreciation (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this topic by reading our...
See straight-line method of depreciation.
To learn more, see Explanation of Depreciation.
See sum-of-the-years’ digits method of depreciation.
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
Featured Review
"I became a PRO user back when I was an accounting student pursuing my bachelor's degree. Accounting is like a whole different language, so I found it difficult to learn in the beginning. As someone who did not have prior accounting knowledge in high school, it would take me a while before I would understand the topics. Then I found AccountingCoach, and it helped me tremendously in really grasping the concepts at my own pace. I also utilized the exams as practice for my actual exams. I found that the most effective way to test one's knowledge is to try it on their own, and the materials on AccountingCoach allowed me to do just that. I graduated Summa Cum Laude and am now an accountant at a local public accounting firm. I am really thankful for the resources provided by AccountingCoach when I was still a student, and I am looking forward to maximizing the benefits with PRO Plus now as a professional!" - Katrina T.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: