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Is depreciation a temporary account?

Harold Averkamp, CPA, MBA

Definition of Depreciation Accounts

There are two types of general ledger accounts in which depreciation is recorded:

  • Depreciation Expense which is a temporary account since it is an income statement account. As a temporary account, Depreciation Expense will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account.
  • Accumulated Depreciation which is a balance sheet contra asset account and its balance is not closed at the end of each accounting period. As a result, Accumulated Depreciation is viewed as a permanent account.
  • Example of Depreciation Accounts

    Assume a company has equipment which is used in its business. The equipment’s cost was $600,000 and is expected to last for 10 years at which time it will be scrapped for no salvage value. Using the straight-line depreciation method, the monthly depreciation will be $5,000 per month ($600,000/120 months). Therefore, each month for 10 years the company will record the following adjusting entry:

    • Debit $5,000 to the temporary, income statement account Depreciation Expense
    • Credit $5,000 to the permanent, balance sheet, contra-asset account Accumulated Depreciation
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About the Author

Harold Averkamp

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

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