Expert: Arthur Naman - 5/4/2009

Question
In an income statement, the entire depreciation is charged as an expenditure, but in the balance sheet the accumulated depreciation increases by the depreciation during the year minus the depreciation deductions during the year. What are these depreciation deductions and why are these deductions not deducted in the income statement.

Answer
Deductions to accumulated depreciation are typically attributable to items sold or disposed of. The accumulated depreciation associated with those assets is removed from the balance sheet as it the cost of the asset disposed of.

The gain or loss recognized is calculated as:
Asset                                              credit
Accumulated depreciation                        debit
Cash received                                    debit
Gain or loss on disposition of asset  credit   <debit>

Make sense??