Tag: book keeping and accountancy

Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation expense (or to manufacturing overhead) since the asset was put into service.

The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).

An asset can reach full depreciation when its useful life expires or if an impairment charge is incurred against the original cost, though this is less common.  The balance sheet will still reflect the original cost of the asset and the equivalent amount of accumulated depreciation.

Credit balance is the normal balance of an accumulated depreciation account.Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.

Provision for discount on debtors is debited to profit and loss account. Provision for depreciation Discount is allowed when our debtors settle our accounts promptly. The amount of discount is an expected loss and has to be recorded in advance.