Depreciation and Amortization Journal Entry

Depreciation and amortization are methods of allocating the cost of tangible and intangible assets over their useful lives. Here are the journal entries to record depreciation and amortization expenses.

Scenario 1: Depreciation of Tangible Assets

Assume a piece of machinery costing ₹500,000 has a useful life of 10 years. The annual depreciation expense using the straight-line method would be ₹50,000.

Journal Entry for Depreciation:

Particulars	Debit (₹)	Credit (₹)
Depreciation Expense A/c	50,000
To Accumulated Depreciation A/c		50,000
(Being annual depreciation expense recorded)

Explanation:

1. Depreciation Expense A/c is debited to record the depreciation expense for the year.
2. Accumulated Depreciation A/c is credited to accumulate the depreciation over the years.

Scenario 2: Amortization of Intangible Assets

Assume a patent costing ₹300,000 with a useful life of 5 years. The annual amortization expense using the straight-line method would be ₹60,000.

Journal Entry for Amortization:

Particulars	Debit (₹)	Credit (₹)
Amortization Expense A/c	60,000
To Accumulated Amortization A/c		60,000
(Being annual amortization expense recorded)

Explanation:

1. Amortization Expense A/c is debited to record the amortization expense for the year.
2. Accumulated Amortization A/c is credited to accumulate the amortization over the years.

Combined Journal Entry for Both Depreciation and Amortization

If a company wants to combine both expenses in a single entry, the journal entry would look like this:

Combined Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Depreciation Expense A/c	50,000
Amortization Expense A/c	60,000
To Accumulated Depreciation A/c		50,000
To Accumulated Amortization A/c		60,000
(Being annual depreciation and amortization recorded)

Explanation:

1. Depreciation Expense A/c and Amortization Expense A/c are debited to record the respective expenses.
2. Accumulated Depreciation A/c and Accumulated Amortization A/c are credited to accumulate the respective amounts over the years.

Summary

1. Depreciation of Tangible Assets:

   • Debit Depreciation Expense A/c
   • Credit Accumulated Depreciation A/c

2. Amortization of Intangible Assets:

   • Debit Amortization Expense A/c
   • Credit Accumulated Amortization A/c

3. Combined Entry for Both:

   • Debit Depreciation Expense A/c
   • Debit Amortization Expense A/c
   • Credit Accumulated Depreciation A/c
   • Credit Accumulated Amortization A/c