Is Depreciation expense recorded in the General Journal?
Yes, depreciation expense is recorded in the general journal. To understand how to record depreciation expense in the general journal, we first need to understand what depreciation is and how it is calculated.
Depreciation is an accounting method used to allocate the cost of an asset over its useful life. It represents the gradual decrease in the value of an asset due to wear and tear, obsolescence, or other factors. Depreciation expense is the portion of an asset's cost that is recognized as an expense in a specific accounting period.
To record depreciation expense in the general journal, you would follow these steps:
1. Determine the amount of depreciation expense for the period: This can be calculated using various depreciation methods such as straight-line, declining balance, or units of production. The chosen method should be consistent with the accounting policies of the company.
2. Identify the asset being depreciated: Determine the specific asset for which you are recording the depreciation expense. This could be a piece of equipment, a vehicle, or any other tangible asset.
3. Debit the depreciation expense account: In the general journal, you would make a debit entry to the depreciation expense account. This increases the depreciation expense and represents the recognition of the expense for the period.
4. Credit the accumulated depreciation account: The accumulated depreciation account is a contra-asset account that offsets the cost of the asset. It shows the total cumulative depreciation recorded over time. In the general journal, you would make a credit entry to the accumulated depreciation account to reflect the increase in depreciation.
5. Provide a brief description: In the general journal entry, it is important to provide a brief description of the asset and the period for which the depreciation expense is being recorded. This helps in providing clarity and reference for future analysis.
By following these steps and recording the depreciation expense in the general journal, you can accurately track the decrease in the value of assets and properly allocate the associated expense over time.