Depreciation Expense Income Statement Definition

Depreciation expense and accumulated depreciation.

Depreciation expense income statement definition. Depreciation expenses are the expenses that charged to fixed assets based on the portion that assets consumed during the accounting period according to the entity s accounting policy. It is reported on the income statement and like other expense accounts reduces taxable income. The journal entry for this depreciation consists of a debit to depreciation expense which flows through to the income statement and a credit to accumulated depreciation which is reported on the. Meaning pronunciation translations and examples.

However depreciation is not deducted from non current assets directly. Depreciation is instead recorded in a contra asset account namely provision for depreciation or. A depreciation expense is the amount deducted from gross profit to allow for a reduction. The same types of fixed assets of different entities might be charged the expenses differently.

The depreciation expense account which receives the debit is a regular expense account. It is accounted for when companies record the loss in value of their fixed assets through depreciation. Don t panic it s really quite simple as our example below will illustrate. In other words it is the amount of an asset s cost that has been allocated and reported as an expense for the period year month etc shown in the income statement s.

The depreciation term is found on both the income statement and the balance sheet on the income statement it is listed as depreciation expense and refers to the amount of depreciation that was charged to expense only in that reporting period on the balance sheet it is listed as accumulated depreciation and refers to the cumulative amount of depreciation that has been charged against all. Depreciation is an expense which is charged in the current year s income statement. Physical assets such as machines equipment or vehicles degrade over time and reduce in value incrementally. Definition of depreciation expense depreciation expense is the appropriate portion of a company s fixed asset s cost that is being used up during the accounting period shown in the heading of the company s income statement.

Definition of depreciation expense depreciation expense is the amount of depreciation that is reported on the income statement. Definition of provision for depreciation or accumulated depreciation or difference between depreciation and provision for depreciation.