JE-11 Jan 2026Manualposted
Buy the van.
| Account | Dimensions | Debit | Credit |
|---|---|---|---|
| 1520 Vehicles | 48,000 US Dollar | ||
| 1000 Cash | 48,000 US Dollar | ||
| Totals | 48,000 US Dollar | 48,000 US Dollar | |
Balanced.
Journal entry for depreciation
Each period, debit Depreciation expense and credit Accumulated depreciation for the period's charge. The asset account keeps its original cost; accumulated depreciation, a contra-asset, grows until net book value reaches salvage value.
- Cost
- $48,000
- Salvage value
- $6,000
- Monthly depreciation
- $700
- Entity
- Illustrative company
- Basis
- Accrual
- Currency
- USD
- Period
- January 2026
The worked example
A delivery van costing $48,000 goes into service on January 1, 2026 with a five-year life and an expected $6,000 resale value. Straight-line, it depreciates by $700 a month; after the first year its net book value is $39,600.
Transaction · January 1, 2026
Adjusting entry · January 31, 2026
JE-231 Jan 2026Adjustingposted
Depreciate January.
Journal entry JE-2, 2 lines Account Dimensions Debit Credit 6400 Depreciation expense 700 US Dollar 1510 Accumulated depreciation 700 US Dollar Totals 700 US Dollar 700 US Dollar Balanced.
Straight-line depreciation, first year
Computed by the same tested function the toolbelt runs. The last period absorbs any rounding, so the schedule sums to the cent.
| Month | Depreciation | Net book value |
|---|---|---|
| Jan 2026 | 700.00 | 47,300.00 |
| Feb 2026 | 700.00 | 46,600.00 |
| Mar 2026 | 700.00 | 45,900.00 |
| Apr 2026 | 700.00 | 45,200.00 |
| May 2026 | 700.00 | 44,500.00 |
| Jun 2026 | 700.00 | 43,800.00 |
| Jul 2026 | 700.00 | 43,100.00 |
| Aug 2026 | 700.00 | 42,400.00 |
| Sep 2026 | 700.00 | 41,700.00 |
| Oct 2026 | 700.00 | 41,000.00 |
| Nov 2026 | 700.00 | 40,300.00 |
| Dec 2026 | 700.00 | 39,600.00 |
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 48,000 US Dollar | |
| 1510 Accumulated depreciation | 700 US Dollar | |
| 1520 Vehicles | 48,000 US Dollar | |
| 6400 Depreciation expense | 700 US Dollar | |
| Totals | 48,700 US Dollar | 48,700 US Dollar |
Why it is booked this way
Depreciation allocates an asset's cost, less what it will be worth at the end, across the periods that use it. It is an estimate made once and applied consistently, not a valuation.
The credit goes to accumulated depreciation so the asset's cost is never overwritten. Cost less accumulated depreciation is net book value — what the asset is carried at.
Common mistakes
- Crediting the asset account, so the register no longer shows original cost.
- Starting depreciation on the purchase date when the asset went into service months later.
- Using tax depreciation in the GAAP books.
Questions
- Why not credit the asset directly?
- So the balance sheet shows both the original cost and how much of it has been used. Net book value is the difference; the cost stays visible for the asset register and the auditor.
- Which depreciation method should I use?
- Straight-line charges the same each period. Declining-balance and sum-of-years-digits charge more early. Book depreciation is a policy choice that should reflect how the asset is used up; tax depreciation (MACRS, bonus) is separate.
Terms on this page
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Depreciation scheduleStraight-line, declining balance or SYD, with the convention that decides the first period. Put your own figures in and get the schedule behind this entry.Tool
- Fixed assets, explained for foundersEquipment and other long-lived purchases above your capitalization threshold are recorded as assets, then depreciated over their useful life.Doc
- Depreciation vs amortizationDepreciation spreads the cost of a tangible asset over its useful life; amortization does the same for an intangible asset — and, in loans and prepaids, for the paying down of a balance over time.Compare
- Adjusting entry vs closing entryAdjusting entries are made at period-end to put revenue and expenses in the right period; closing entries are made at year-end to move the period's revenue and expense balances into retained earnings.Compare
- CapEx vs OpExCapital expenditure buys an asset that will serve for more than a year and is depreciated over that life; an operating expense is consumed in the period and hits the P&L in full immediately.Compare
- Journal entry for an equipment purchaseWhen equipment is bought, debit the fixed asset account for its full cost — price plus delivery and installation — and credit Cash or Accounts payable. Nothing is expensed on the day of purchase; the cost reaches the P&L as depreciation.Entry
- Journal entry for the sale of a fixed assetWhen a fixed asset is sold, debit Cash for the proceeds and Accumulated depreciation for its balance, credit the asset for its original cost, and book the difference as a gain (credit) or a loss (debit) on sale.Entry
- Journal entry for capitalized softwareCapitalize qualifying development cost by debiting Capitalized software and crediting the expense it was first booked to (usually wages). Once the software is ready for use, debit Amortization expense and credit Accumulated amortization each month over its useful life.Entry
- DepreciationScheduleBook and tax in parallel. In-service date, not purchase date.Component
- RollForwardOpening → movements → closing → tie. The universal shape.Component
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.