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Depreciation is also neither a credit nor a debit. Doesn't one normally handle depreciation by creating an expense account called "depreciation", and recording
by mumblemumble 6y ago
Depreciation 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.