#4. If so, state to which account it is closed. Liability Balance Sheet Credit Permanent. Debit your Depreciation Expense account $1,000 each month and credit your Accumulated Depreciation account $1,000. Depreciation expense is the YTD depreciation booked. 19) Service revenue is a temporary account. Definition: Accumulated depreciation is the total sum of depreciation expense recorded for an asset. At the beginning of the accounting year 2018, the balance of the plant and machinery account was $7,000,000, and the balance of the accumulated depreciation account was $3,000,000. Contra Asset Balance sheet Credit permanent. While the depreciation expense is a temporary or nominal account reported on the income statement and closed each accounting period, accumulated depreciation is a real or permanent balance sheet account that accumulates the asset depreciation expense from year to year. In other words, its the amount of costs the asset has been allocated thus far in its useful life. The amount of a long-term asset’s cost that has been allocated, since the time that the asset was acquired. Accumulated Depreciation is different from the other three because it is a Balance Sheet account and the other 3 are Income Statement accounts, so I'd go with Accum Depreciation. Bonds payable. There is a company, A ltd having the plant and machinery. A) Accumulated depreciation B) Depreciation expense C) Withdrawals D) Sales revenues 4.3-29 Which is NOT an example of a temporary account? Is Cicely Tyson related to Min Louis Farrakhan? Expenses 3. Distinguish differences between depreciation expense, which is reported on the income statement, and accumulated depreciation, which is a running total. Accumulated Depreciation is a permanent account. This means that accumulated depreciation is an asset account with a credit balance. Accumulated Depreciation is a contra asset account and its balance is not closed at the end of each accounting period. 18) Accumulated depreciation is a permanent account. When depreciation expenses appear on an income statement, rather than reducing cash on the balance sheet, they are added to the accumulated depreciation account. The amount of the net income for a period appears on both the income statement and the balance sheet for that period. Equity 5. Why don't libraries smell like bookstores? In the organizational point of view, it is so important to know about the ways of accounting for depreciation as there are many fixed assets like buildings, office equipments and machines, furniture which are depreciated over time. Whether it is closed during closing entries. To learn more, see the Related Topics listed below: Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. 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