DEPRECIATION AND ACCOUNTING FOR DEPRECIATION.

Transcript

00:00This is why you need to know depreciation.

00:02Depreciation is a fall in the value of tangible assets having expected useful life.

00:07Land is excluded here because it has infinite economic life.

00:11It's how businesses manage the wear and tear on their stuff.

00:14Depreciation spreads out the cost of things like machinery,

00:18buildings and vehicles over their useful life.

00:20It shows how much value these assets lose each year due to wear and tear or getting old.

00:26There are two main ways to record depreciation in accounting books.

00:30First, when depreciation is charged to the asset account.

00:33Here's how it works.

00:34Debit depreciation account, credit asset account.

00:38Then, debit profit and loss account, credit depreciation account.

00:42Next, when depreciation is credited to the provision for depreciation or

00:46accumulated depreciation account.

00:49The steps are debit depreciation account, credit provision for depreciation account.

00:54Then, debit profit and loss account, credit depreciation account.

00:59And that's a quick guide to depreciation methods.

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01:05Thanks for watching.