Depreciation and appreciation
In
finance and accounting, terminology is everything. Depreciation and
appreciation are two sides of the same coin. Depreciation is when the value of
assets goes down, and appreciation is when the value of assets goes up. Another
type of depreciation that can confuse people is asset depreciation. This is an
accounting term used to describe a certain type of write-off.
1. Depreciation and appreciation of Fixed Assets:
Depreciation: Depreciation is decreased in the value of fixed
assets. It is decreased due to the various reasons. It is
a loss, therefore, depreciation is debited. It decreases the value of fixed
assets; therefore, fixed asset account is credited. For example; provide
depreciation on furniture Rs. 5,000 p.a.
Appreciation: Appreciation is the opposite of depreciation. It increases the
value of assets, therefore assets account is debited and appreciation account
is credited as a gain of the business. For example; the value of land is
appreciated by Rs.20,000.
Journal entry
Date
|
Particulars
|
L.F.
|
Dr. (Rs.)
|
Cr. (Rs.)
|
a)
|
Depreciation on Furniture A/C Dr.
To Furniture A/C
(Being depreciation charged on furniture)
|
5,000
|
5,000
| |
b)
|
Land A/C Dr.
To Appreciation on Land A/C
(Being appreciation on the value of land)
|
20,000
|
20,000
|
The End