Accounting Question (Simple)

Discussion in 'Economics' started by FishSauce, Dec 24, 2003.

  1. Amoritization and Depreciation..

    With regard to balance sheet, they represent reduction in assets (LHS- left hand sided), what is the countering RHS? In other words, to balance the balance sheet, what part of equity or liabilities are deducted?

    Thanks in advance,
  2. DK_


    If you're going to reduce your assets, you increase your ammortization expense which flows through retained earnings.
  3. If I remember my univ accounting course correctly, both are on the LHS. Depreciation goes to decrease your capital assets. Since this message board doesn't allow tabs for formatting, a > will indicate a tab.

    >Cash $10000
    >Accounts Rec $20000
    >Capital Assets $180000
    >>Less accumulated amortization ($34000)
    >Goodwill $10000
    TOTAL ASSETS $186000

    Remember that you do your Income Statement first before your Balance Sheet. Depreciation is an expense. The end result should show up on RHS as less Retained Earnings in your Equity to make it balance.

    Someone correct me if I'm wrong. It's been 3 years since my course.

  4. Formatting is all explained here :

       Cash                                                    $10000
       Accounts Rec                                            $20000
       Capital Assets                                         $180000 
            Less accumulated amortization                     ($34000)
       Goodwill                                                $10000
    TOTAL ASSETS                                              $186000
    It's been 30 years since mine, so whatever you say is fine by me.
  5. Thanks! Learn something new everyday.