| Adjustment JournalsLN identifies data for journal creation each time you adjust cost, accumulated
depreciation, method, or life for an asset. Different journal entries result
depending on the type of adjustment you make: - For adjustments that increase cost, LN debits the asset
account and credits the capital accumulation account.
- For adjustments that reduce cost, LN credits the asset
account and debits the capital accumulation account.
- For adjustments that increase accumulated depreciation, LN credits the
accumulated depreciation account and debits the depreciation expense account
for each line in the asset's distribution.
- For adjustments that decrease accumulated depreciation, LN debits the
accumulated depreciation account and credits the depreciation expense account
for each line in the asset's distribution.
- For retroactive adjustments to life, LN debits or credits the
accumulated depreciation account and credits or debits the depreciation expense
account for the difference, depending on whether the adjustment increased or
decreased life. For prospective adjustments to life, no journal results.
- For adjustments to depreciation methods, LN debits or credits the
depreciation expense account and credits the accumulated depreciation account,
depending on the change made.
For example, a capital staff accountant at a company is asked
to increase the cost of a propane forklift from $75,000 to $77,500, due to a
clerical error during the original entry. The following journal is created: Journal Number 4040 Account F.Assets Machinery and Eqpt - None - None 2,500 debit Acquisition, Mach. and Eqpt - None - None 2,500 credit The adjustment was made effective from the asset's in-service
date, so LN also adjusts
the accumulated depreciation and the related depreciation expense. New
depreciation journals are created for those changes. Note For intercompany assets, adjustments that cause a restatement
of depreciation cause additional journal entries. | |