How would depreciation affect the balance sheet?
submitted by tanvir

Ronco5000

You would debit Depreciation and credit Fixed Assets. It wouldn't affect cash in any way.To see the effect of depreciation on a balance sheet, take a look at the Interactive Balance Sheet.

JRjohnson

Depreciation only affects the value of an asset on the balance sheet.

On the profit/loss statement it's counted as an expense, because you're technically losing money. It counts toward the total expenses, and therefore lowers earnings on the balance sheet.

shen

Depreciation is a contra asset account and it therefore reduces the amount of depreciable assets.

Liaqat

Depreciation is used to show high expense and decrease the tax cost. As the fixed asset loses its value over the passage of time, depreciation is there to compensate the business with this losing of value. The effect of depreciation is shown on the income statement which is recorded as an expense.

depn

You would debit depreciation in the profit and loss a/c and 2nd effect less from balance sheet from the asset because the value of the asset decreases when the asset is being used.

manik kumar

It totally depends on the account. It will affect the journal differently in different cases.

akala akintunde

depreciation will reduce the value of Asset in the balance sheet and affect the profit brought forward. then in the profit or loss it would be expensed