Journal Entry for Vehicle Depreciation

Journal Entry for Vehicle Depreciation

In this article we would explain journal entry for vehicle depreciation. The journal entry for depreciation may be recorded in two ways. In first method the depreciation is debited and a contra account i.e. accumulated Depreciation for vehicle is credited.

This journal entry provides maximum information in statement of financial position about asset. The financial statement is not only showing the original cost of assets, but also the accumulated depreciation charged on assets and carrying amount of assets. A sample journal entry is shown below

Date	Particular	Ledger Folio	Dr.	Cr.
	Depreciation		xxx
	Acc. Depreciation for Vehicle			xxx

In second method depreciation is debited as expense and vehicle is credited. This accounting treatment provides limited information about the asset and asset are appearing in the financial statement at carrying amount.

Date	Particular	Ledger Folio	Dr.	Cr.
	Depreciation		xxx
	Vehicle			xxx

Example of Journal Entry for Vehicle Depreciation

A Vehicle purchased by the company costing 180,000, the company decided to charge the depreciation at the rate of 10% on straight line method. The journal entry for depreciation may be recorded in two way as explained above.

Journal Entry for Vehicle Depreciation (Accumulated Depreciation Method)

Under this method depreciation is debited being expense and accumulated depreciation is credited being decrease in asset (through contra account asset account). A contra asset account created with name of accumulated depreciation.

Date	Particular	Ledger Folio	Dr.	Cr.
	Depreciation		18,000
	Acc. Depreciation for Vehicle			18,000

The contra asset account balance is deducted from the original cost of asset. Thus statement of financial position is showing the cost of assets, accumulated depreciation charged to assets and carrying amount of assets. The accumulated depreciation method facilitates the following presentation

Vehicle at Cost	180,000
Accumulated Depreciation	18,000
Carrying Amount (Net amount).	162,000

 

Journal Entry for Vehicle Depreciation (Direct Depreciation Method)

In this method depreciation is directly charged or deducted from asset. The depreciation is debited being expense and asset value is reduced by the same amount by crediting the asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Depreciation		18,000
	Vehicle			18,000

Under this method financial statement of the company is only showing the carrying amount of the asset.

Vehicle

162,000