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Re: Example of depreciation transactions?

On 11/12/06, Ed W <..hidden..> wrote:

> AP transactions are better than invoices for this.

Yes, sure.  Actually that is what I used.  Bad terminology on my part.  :-)

> You can also make an asset account show up  on the AP transactions
> screen by checking the Payables Expense/Asset checkbox.  Moving the
> money to expense first needlessly complicates your  books.  IANACPA,
> but I have a hard time believing that this is GAAP compliant.

Indeed.  I realise this, but it's not setup like this from the start and
so I wonder if I am missing something?  Perhaps Dieter had an
alternative proposed solution...

Just to be clear: you are suggestion that the GAAP correct method is
(probably) to book the transaction directly into the asset account?

Right.  Not 100% sure.  Maybe a Real Accountant could comment? But
that seems to be in keeping with every example I have ever seen,

> Just checking-- this is an accrual basis statement, right?
> And trial balance shows the amounts, right?

Yep.  Balance sheet shows (say). Assets £300, Depreciation £200 - where
the original transaction was for a £500 item, ie we are simply seeing a
transfer from Assets to depreciation

So the depreciation shows up on the balance sheet?  Under which
section?  Is your depreciation account really an expense account (as
it should be)?

Ok, here is my thought:

Purchase item:
credit liabilities (AP), debit assets (capital assets)
credit assets (cash), debit liabilities (AP),
credit assets (capital assets), debit expense (depreciation)

Best Wishes,
Chris Travers