Time for action – making depreciation entries for assets
You bought a computer with a high speed processor, extra memory, and disk space, for $3000, to serve as your small business server. Let us walk through how you will account for the purchase of the capital asset initially and how you will account for the depreciation expense each month:
Create a new account called Office Equipment with Account Type as Asset and Parent Account as Assets.
On the date of purchase make an entry showing an Increase of $3000 in the Office Equipment account and select the Checking Account in the Transfer column.
We are going to apply a straight-line method of $50 depreciation per month over the 60 month period. This is just an example. More details follow in this section about what depreciation rates are allowed by tax laws. On the last day of the month, create a transaction in the Expenses:Depreciation account showing an expense of $50 and select the Office Equipment account as the Transfer account as shown...
