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    kae0420's Avatar
    kae0420 Posts: 1, Reputation: 1
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    #1

    Mar 31, 2009, 01:25 PM
    Net effect of a depreciation debit and cash credit
    Hi - I'm new here, so I am sorry if I'm going about this in the wrong way.

    I have a question about recording depreciation.

    The example I was given shows a debit to depreciation expense and a credit to the cash account. The depreciation is for equipment, so I don't believe the cash account should be effected at all.

    I'm not really sure what the effect would be of this error as far as total assets and value of depreciable assets.

    Please let me know if this makes any sense!
    ROLCAM's Avatar
    ROLCAM Posts: 1,420, Reputation: 23
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    #2

    Apr 1, 2009, 02:47 AM

    You are quite right.
    There is NO connection with the Cash Account here.

    The entry should be:-
    DEBIT Depreciation Account.
    CREDIT Provision for Depreciation of Asset A/c

    You are again right.
    If the credit to the Provision is not made
    The balance of the net asset would be incorrect.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #3

    Apr 4, 2009, 04:27 PM

    Your Cash will be understated, and your depreciable assets will be overstated.
    ROLCAM's Avatar
    ROLCAM Posts: 1,420, Reputation: 23
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    #4

    Apr 4, 2009, 09:34 PM

    pready,

    When it comes to DEPRECIATION, CASH does
    Not come into the picture at all.
    Cash flow is not interrupted whatsoever
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #5

    Apr 5, 2009, 02:23 PM
    I KNOW THAT!! I answered KAE0420 about the error of the transaction.
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