[wanye]

Hi all,

To my understanding, depreciation expense is always DR, and accumulated depreciation is CR, right? However, I am quite confused on whether does an accumulated depreciation becomes DR? Or when it will become DR instead of CR?

For example,

An equipment of expected useful life 5 yrs costs 32000 was purchased 4 yrs ago. It was sold at a loss of $3000 at year end due to badly damaged. The company uses str line method with zero residual value.

Shouldn't the adjusting entry be:

Depr exp 25600 (DR)
loss 3000 (DR)
cash 3400 (DR)
Equipment 32000 (CR)

However the standard answer given to me is Acc Depr 25600 (DR), this is where it got me confused. Need to clarify on this.

And is it true that loss on sale is always DR and gain on sale is always CR?

[goldenbutterfly]

Depreciation expense is normally debited and Accumulated Depreciation is credited if you will be adding depreciation to an equipment still owned by the company that has not been fully depreciated. However, at the time of sale of the equipment, you will have to close the balance sheet accounts pertaining to the equipment. So you debit Accumulated Depreciation and credit Equipment.

Yes, normally loss is debited and gain is credited.