11-11-2010, 07:41 AM
I understand the calculations behind it and how to do it, but don't really know the meaning.
Example I purchase a car for 20,000 and expect it to last 10 years with 0 residual value.
Using straight line method, i would have a depreciation expense of 2,000 a year for 10 years.
What is the purpose of this though? The original entry would be
Dr. Car
Cr. Cash
Why do I need an expense every year for it? It's not an "actual" $2,000 expense right?
Thanks
Example I purchase a car for 20,000 and expect it to last 10 years with 0 residual value.
Using straight line method, i would have a depreciation expense of 2,000 a year for 10 years.
What is the purpose of this though? The original entry would be
Dr. Car
Cr. Cash
Why do I need an expense every year for it? It's not an "actual" $2,000 expense right?
Thanks
