Depreciation expense is charged to the "accumulated depreciation" account.
Accumulated depreciation generally refers to the depreciation of fixed assets. Enterprises use fixed assets in the production and operation process and its wear and tear lead to a reduction in the value of only a certain residual value, the difference between its original value and the residual value of its use in its useful life is assessed, is the depreciation of fixed assets. Determine the scope of depreciation of fixed assets is the premise of depreciation.
Depreciation expense refers to the depreciation expense calculated according to the original value of the fixed assets of the enterprise, excluding the non-depreciable fixed assets factor, in accordance with the specified residual value rate and depreciation method. Depreciation expense for fixed assets is charged monthly from the month following the month in which the fixed assets are used; for fixed assets that are no longer in use, the charge ceases from the month following the month in which they are deactivated. The accounting amount, usually calculated as a fixed percentage of the original cost of the asset, is required to be charged periodically to the expense account or deducted from gross income to compensate for the depreciation of the asset.
Method of Allocation of Depreciation Expense
Since depreciation expense does not account for a significant portion of the cost of a product, it is generally treated as an overhead expense and charged to the relevant consolidated expense according to its economic purpose and place of use.
For example, the depreciation of fixed assets used in the basic production workshop should be charged to the depreciation expense item in the manufacturing cost ledger; the depreciation of fixed assets used in the auxiliary production workshop should be charged to the relevant item in the auxiliary production expense ledger; the depreciation of fixed assets used in the administrative department of the enterprise should be charged to the depreciation expense item in the administrative expense ledger; the depreciation of fixed assets used in the sales department should be charged to the product cost ledger; the depreciation of depreciation should be charged to the product cost ledger. Depreciation expense for fixed assets used in the sales department shall be recorded in the relevant item in the detailed account of product sales expenses.
If the enterprise is producing a single variety of products, all the costs incurred are borne entirely by that product, and the cost items can be set according to the economic content of the costs. In this case, all costs are direct costs, so depreciation expense can be charged directly to the "production costs" ledger in the "depreciation" cost item.
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