Dictionary / Depreciation Expense

What does Depreciation Expense mean in accounting?

Quick definition

Accrual & timing

That portion of the cost or other basis of a fixed asset or fixed-asset group charge against the operations of an accounting period. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.

Examples

March takes $80, not the slicer

You run a butcher shop. On January 6 you put a used gravity slicer from an equipment supplier in service at $4,800 with a five-year life. At the March 31 close the fixed-asset schedule shows $80 for this month: that $80 is depreciation expense, March's portion of the slicer's cost charged against March operations. Debit Depreciation expense $80 and credit accumulated depreciation $80 so March's P&L and the general ledger both show $80, while the slicer stays on the balance sheet at $4,800. In QuickBooks Online or Xero this is the recurring depreciation journal, not a bill; match the P&L to the schedule's current-period column, not the purchase.

The plotter bill is not October's charge

You run a window-film shop. On October 3, a window-film supplier bills $11,200 for a used plotter you will keep for years, and you almost code the bill to Depreciation expense so October's P&L takes the full $11,200. That is the whole basis, not this accounting period's portion. Add the plotter as a fixed asset at $11,200, then at the October 31 close post only the fixed-asset schedule slice of $187 to Depreciation expense and credit accumulated depreciation $187. October's P&L should show $187, not $11,200; later months take their own slices.

Why it matters

Depreciation expense is this accounting period's slice of a fixed asset cost, the depreciation that hits the P&L, and you post it every month-end if you keep equipment, vehicles, or furniture on a fixed-asset schedule. Skip the entry and the period looks stronger than operations were; charge the whole purchase to one month and profit is wrecked while later months look free. The depreciation rate is only the percentage that produces that slice, so do not post the percentage as the expense. Unusual extra wear is extraordinary depreciation, and a write-down of timber, gravel, or a mineral deposit is depletion.

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Frequently asked questions

What is Depreciation Expense in bookkeeping?

That portion of the cost or other basis of a fixed asset or fixed-asset group charge against the operations of an accounting period.

When should I use Depreciation Expense?

Use Depreciation Expense when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.

What is a common mistake with Depreciation Expense?

Depreciation Expense is used for depreciation expense entries, while Daybook covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.