At the end of an accounting period, you must make an adjusting entry in your general journal to record depreciation expenses for the period. The Internal Revenue Service has very specific rules regarding the amount of an asset that you can depreciate each year. You don't have to compute depreciation for your books the same way you compute it for tax purposes, but to make your life simpler, you should. You should consult your accountant about how to compute depreciation.

More than likely, your accountant will make this adjusting entry for you, or your accountant may be able to provide you with a schedule showing the amount of depreciation for each asset for each year.

 

Your business has equipment and a building. Using a depreciation schedule provided by your accountant, you determine that current period depreciation is $3,400 on the equipment, and $2,550 on the building. You need to make the following adjusting entry to record depreciation expense and update your accumulated depreciation accounts: