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About depreciation accounts

Your company’s vehicles and equipment deteriorate and lose value each year. Part of the cost of vehicles and equipment can be allocated as an expense to your business each year you benefit from their use. The allocation of the cost of a piece of equipment over its useful life is called depreciation.

There are several methods of recording depreciation. Consult an accounting advisor (such as your accountant) to see which method is best for your business.

If you depreciate your assets at the end of the financial year, make this step a part of your end-of-year routine. Consult an accounting advisor (such as your accountant) for information about when to depreciate your assets.

While MYOB doesn’t calculate depreciation automatically, you can quickly record your depreciation figures using a journal entry. For more information see General Journals.

For example, you might have two asset accounts containing depreciable assets: Motor Vehicles (fixed asset account 1-1140) and Office Equipment & Computers (fixed asset account 1-1160).

To allow for depreciation, MYOB comes with some standard depreciation accounts. But if needed, you can create two new asset accounts: Motor Vehicles—Accumulated Depreciation (fixed asset account 1-1150) and Office Equipment & Computers—Accumulated Depreciation (fixed asset account 1-1170).

You would also create an expense account called Depreciation.

The asset accounts will always have a negative balance to show a reduction in the value of the depreciable assets.

Let's take a look at setting up these accounts and recording a depreciation amount with a journal entry.