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What is straight line depreciation journal entry?

What is straight line depreciation journal entry?
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    1. Straight Line Depreciation Journal Entry

      Straight-line depreciation refers to the diminishing value of assets over the life of the asset. In other words, the cost of the asset spreads evenly over the useful life of the assets.

      The salvage value or Residual value of an asset means the estimated value of the asset at the end of its useful life.

      The depreciation can also be charged with another method like Written Down Value (WDV) Method.

       

      Formula

      Depreciation per annum = ( Cost of asset – Salvage Value) / Useful Life

       

      The journal entry for the depreciation is:

      JOURNAL ENTRIES

      		  
      Depreciation on Asset A/C                               DR.
                                  To Asset A/C
      (Being depreciation charged on asset)

       

      Now let us understand this with an example, suppose XYZ Ltd. has an asset of value 90,000 with a useful life of 3 years. The company uses the straight-line method of depreciation to depreciate the asset in its book.

       

      So, the depreciation per annum would be calculated as:-

      = 90,000/3

      = 30,000

       

      In Year 1, the depreciation will be charged as 30,000 for this year. It will be debited to the  depreciation account and credited to the asset account. Thus, the value of the asset at the end of year 1 will be 60,000 (90,000-30,000).

      JOURNAL ENTRIES

      		  
        DR CR
      Depreciation on Asset A/C                                                   30,000
                To Asset A/C                                                                                                              30,000
      (being depreciation charged on asset)

       

      In Year 2, the depreciation will be charged as  30,000. The entry would be the same as the previous year. The value of the asset at the end of year 2 will be 30,000 (60,000-30,000).

      JOURNAL ENTRIES  
        DR CR
      Depreciation on Asset A/C                                                   30,000
                To Asset A/C                                                                                                                  30,000
      (being depreciation charged on asset)

       

      At last in Year 3, the depreciation will be charged 30,000. The entry would be the same. The value of the asset at the end of year 3 will be Nil (30,000- 30,000).

      JOURNAL ENTRIES

      		  
        DR

      CR
      Depreciation on Asset A/C                                                30,000
                To Asset A/C                                                                                                            30,000
      (being depreciation charged on asset)

       

      The depreciation will be charged to the profit and loss account for the year as it is an expense for the company.

       

      The entries will be posted into depreciation account as mentioned:

      DEPRECIATION A/C  
      Date Particulars Amount Date Particulars Amount
      Year 1 To Asset A/C 30,000   By Profit and Loss A/C 30,000
          30,000     30,000
                 
      Year 2 To Asset A/C 30,000   By Profit and Loss A/C 30,000
          30,000     30,000
                 
      Year 3 To Asset A/C 30,000   By Profit and Loss A/C 30,000
          30,000     30,000
                 

       

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