Depreciation refers to two very different but related concepts:
- the decrease in value of assets (fair value depreciation), and
- the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).
The former affects values of businesses and entities. The latter affects net income. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Such expense is recognized by businesses for financial reporting and tax purposes.
Depreciation
Your company’s assets, such as vehicles and equipment, deteriorate and lose value during the year, to record this deterioration in your MYOB data file you need to record a General Journal for Depreciation Expense. Accounting principles and the Australian Taxation Office (ATO) consider this an expense to your business. Consequently, part of the cost of some equipment can be posted as an expense to your company’s Profit and Loss Statement, which reduces your taxable income. This post explains the accounts and transactions involved.
Asset Account
On purchase of capital equipment you should have created an asset account to reflect the purchase. So far this transaction has not affected the Profit & Loss accounts but to truly reflect your commercial position it should, so the question is how do we do this? By simply posting a General Journal entry that reduces the value of the asset and increases the value of depreciation expense in the general ledger.
The Effect
The effects of depreciation on the balance sheet can be seen in the next image. An asset costing $25,000 has now had is value written down to $17,500.
If you need more information regarding how to record General Journal refer to the MYOB support Note, General Journals
Read more: http://www.rightaccounts.com.au/end-year-depreciation/#ixzz4mCtbwkBG
Ref: http://www.rightaccounts.com.au/end-year-depreciation/#jp-carousel-4850
