We started a small business with paid up vehicle.so we want to know the journal entry,the cost of vehicle was 68000,please can u show samples.

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Originally Posted by sefako

We started a small bussiness with paid up vehicle.so we want to know the journal entry,the cost of vehicle was 68000,please can u show samples.

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The two sides of the entry are fixed assets and proprietors' equity

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Originally Posted by paraclete

the two sides of the entry are fixed assets and proprietors' equity

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you mean that I credit equity and debit fixed asset.

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Originally Posted by sefako

you mean that I credit equity and debit fixed asset.

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You got it

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Originally Posted by paraclete

you got it

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Thanks,and how to depreciate this.the depreciation is 13600 for 5Years
What is the journal entry of accumulated depreciation and journal entry for depreciation expence please help.

Debit Depreciation Expense (expense account) for the amount of depreciation
Credit Accumulated Depreciation (contra asset asset account) for the amount of depreciation

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Originally Posted by pready

Debit Depreciation Expense (expense account) for the amount of depreciation
Credit Accumulated Depreciation (contra asset asset account) for the amount of depreciation

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Thanks.when I debit depreciation expense it affects checking account.

Depreciation does not affect cash. Look at my journal entry. The only acocunts affected are an Expense Account and an PP&E(Plant, Property, and Equipment) asset account. It is used to match the use of equipment in the period the equipment was used to provide an economic benefit to the company. This is known as the matching principle under U.S. GAAP (Generally Accepted Accounting Principles)

[QUOTE=pready;3136582]Depreciation does not affect cash. Look at my journal entry. The only acocunts affected are an Expense Account and an PP&E(Plant, Property, and Equipment) asset account. It is used to match the use of equipment in the period the equipment was used to provide an economic benefit to the company. This is known as the matching principle under U.S. GAAP (Generally Accepted Accounting Principles)[/QUOTE
Just look if I've done it wright:income statement operating profit was 4801,12 then after I debited Depreciation expense net profit is 2801,22.I may sound anyhow but I want to understand.

Depreciation Expense is part of the Operating Profit, so it would reduce your operating profit.

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Originally Posted by pready

Depreciation Expense is part of the Operating Profit, so it would reduce your operating profit.

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Thanks now I do understand.