How is depreciation accounted?

Question by Rakes: How is depreciation accounted?
If I buy a 10 000$ manufacturing robot, do I write 10 000$ as an expense in the balance sheet and write 10 000$ in the asset portion of the balance sheet while writing off 2 000$ in the asset portion yearly to take into account the loss of value?

Best answer:

Answer by JKRB
First of all, expenses go on the income statement, not the balance sheet. Large expenditures for equipment would not be expensed when purchased, they would be recorded at cost and depreciated over their useful lives. When the robot was first purchased the journal entry would have been something like this:
Dr Robot 10,000
Cr Cash (or Accounts Payable) 10,000

When the depreciation is accounted for, the journal entry would be:
Dr Depreciation Expense, Robot 2,000
Cr Accumulated Depreciation, Robot 2,000

Accumulated Depreciation is a contra-asset account. It is subtracted from the cost on the balance sheet to calculate net assets.

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