Depreciation is allocating the cost of a long-term fixed asset over its useful life. The straight-line depreciation method is the most common method for calculating depreciation and also highly uses for calculating of depreciation. Here's a typical journal entry to record depreciation using the straight-line method. Depreciation is taken out only on fixed assets.
As an example, you have an asset that costs $10000 which is a useful life of 5 years and there is no salvage value.
Calculate Annual Depreciation
Annual Depreciation = Cost of Assets - Salvage Value / Useful life of Assets.
in this case, there is no any salvage value
Annual Depreciation = $10000- $0 / 5 years = $2000
Journal Entry of Depreciation
Depreciation A/c Debit
to Asset A/c Credit
or
Accumulated Depreciation A/c Debit
to Asset A/c Credit
This entry reflects the allocation of $2,000 of the cost of assets to depreciation for the year. You have to repeat this entry until the asset is fully depreciated or until the end of its useful life. The accumulated depreciation account is a contra-asset account, meaning it offsets the value of the asset. The asset account is reduced by the accumulated depreciation amount.
