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...but sometimes things aren't inflows or outflows. Depreciation is neither, yet it's (almost) fundamental to accounting.
by jamesmackennon 6y ago
...but sometimes things aren't inflows or outflows. Depreciation is neither, yet it's (almost) fundamental to accounting.
- mumblemumble 6y agoDepreciation is also neither a credit nor a debit. Doesn't one normally handle depreciation by creating an expense account called "depreciation", and recording the depreciation as a debit in the asset account and a credit in the depreciation account? And couldn't one just as easily word that as, "We track the depreciation by creating an account for it, and recording a flow of money into it from the asset's account?"
- feanaro 6y agoYes, but the other way around: you debit the "Depreciation" expense account (since it is the sink, it increases) and credit the asset account (it is the source, it decreases).
- mumblemumble 6y agoI rest my case.
- bokstavkjeks 6y agoYou often end up with three accounts. Asset (balance sheet), accumulated depreciation (balance sheet), and the depreciation expense account (P&L). In which case the depreciation is cr. acc. depreciation and dr. depreciation expense.