How does a depreciation schedule work?
The supporting schedule listing each asset, its cost, life, and depreciation to date. It sits behind the statements, not as a line on them.
Definition
A depreciation schedule is the worksheet that tracks every capitalized machine, vehicle, or fixture the shop still holds. On the books, this is support sitting behind the assets on the statements, not a line you post to.
Each row is one item. Anyone posting the period's charge should be able to see cost, remaining life, and how much has already been taken.
A cabinet shop uses it so a CNC, an edge bander, and a delivery van do not blend into one lump. The Balance Sheet shows totals; this list shows the pieces.
Where it shows up
Balance Sheet: Related to the long-lived asset lines this schedule supports.
P&L: Related to depreciation taken each period.
See also: Fixed Asset Register · Depreciation Expense · Supporting Schedule
When you look at your Balance Sheet, you will not find this schedule as a line. It sits behind the non-current assets that still carry cost.
The profit and loss statement does not list the schedule either. The related amount is this period's depreciation, which should match the sum of the rows for the period.
Recording that charge does not move cash. Cash already moved, or will move, when the item was bought.
A high remaining-cost total can mean recent purchases or long lives. A list that is mostly fully charged off can mean older machines that are still running.
How it works
A typical path starts when a purchase is capitalized. You add a row with cost, date in service, life, and method, and you keep that row until the item is sold or retired.
Each period, you read the schedule to size the charge. You debit depreciation expense and credit accumulated depreciation for the period's amount.
Stay with this worksheet: it is the source for that entry, not the entry itself. The asset account still holds original cost, and the contra-asset holds the running total.
If you add a new machine, you add a row. If you dispose of one, you take the row off after the disposal so the list still agrees to the books.
A recurring journal entry can post the same accounts each month. Change the amount when a row is added or removed, or you will charge a machine you no longer have.
Do not let the schedule drift from the items the shop actually owns. A machine on the floor with no row, or a row with no machine, is how the statements stop tying out.
Keep lives and methods on the same row as cost. Anyone picking up the file later should be able to see why this month's charge is the number it is.
If use really changes, update remaining life going forward. You do not rewrite prior periods from this worksheet.
The period's expense on the P&L should equal the sum of this period's column. The stacked depreciation on the Balance Sheet should equal the sum of depreciation taken to date on the rows.
Example
A cabinet shop buys a $12,000 edge bander and puts it in service. The shop assigns a 5-year life with no salvage, so the monthly charge is $200.
The shop adds a row: cost $12,000, life 60 months, taken to date $0. That row is how next month's entry is sized.
At month end the shop records:
Debit: Depreciation expense $200
Credit: Accumulated depreciation $200
Operating expenses on the P&L rise by $200, and accumulated depreciation on the Balance Sheet rises by $200. Cash has not moved.
The schedule now shows $200 taken and $11,800 remaining. The edge bander is still an asset; the worksheet only supported the period's charge.
Common mix-ups
A depreciation schedule is not depreciation expense. The schedule is the worksheet; the expense is the period's charge on the P&L.
A depreciation schedule is not the fixed asset register. The register is the subledger of items the business owns; the schedule is the calculation of cost still to be charged.
A depreciation schedule is not accumulated depreciation. Accumulated depreciation is the contra-asset on the Balance Sheet; the schedule is the support that should agree to it.
Related terms
- Fixed Asset Register: The subledger listing every capitalized asset the business owns.
- Depreciation Expense: The periodic charge that spreads a fixed asset's cost over its useful life.
- Accumulated Depreciation: The contra-asset account holding all depreciation taken on assets to date.
- Net Book Value: An asset's original cost minus the depreciation recorded against it.
- Supporting Schedule: A detailed worksheet backing up a single line on the financial statements.
- Recurring Journal Entry: A standard entry set to repeat each period with the same accounts.
- Useful Life: The number of periods a fixed asset is expected to serve the business.
- Capital Expenditures: Spending to buy or improve long-lived assets.