BUS–A 201 at Indiana University--Bloomington

6. Depreciation in Cash Flows

in Topic 13 (Video 6 of 8)
Finding depreciation expense when doing the statement of cash flows.

People Have Asked Questions About This Video

Q: Depreciation expense is 46,500 but the accumulated depreciation is 48,500. How? Because whatever the accumulated depreciation should be the dep expense... Shouldn't the depreciation expense also be 48,500?

A: Good question. Whenever you record a depreciation expense, you do indeed record A/D at the same amount. In the video, at the 4:30 mark, I show the journal entry to be a debit to Dep Exp for 46,500 & a credit to A/D for 46,500. That's the journal entry when we *record* depreciation expense. But there was another event that cause the A/D to decrease, and that was the asset disposal.

We disposed of an asset for 1,500 cash, and ALSO had to get it's A/D off the books, which we did by decreasing the A/D account by 48,500.

So the 46,500 and 48,500 are two completely separate events.

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