Yeah, when you buy an asset, you have to record the book value of that asset, which is the purchase price. If the asset is later sold for a lower price, then the difference between that and is book value is depreciation, which looks like a kind of expense.
If you buy a $2,000 asset, and write it up as $1,500, it looks as if you actually bought a $1,500 asset, and siphoned $500 into your pocket.
But how can that even work? The ledger entries will not sum to zero. The $500 has to appear in the books somewhere.
It has to be accounted for; that's why we call this accounting. :)
If you buy a $2,000 asset, and write it up as $1,500, it looks as if you actually bought a $1,500 asset, and siphoned $500 into your pocket.
But how can that even work? The ledger entries will not sum to zero. The $500 has to appear in the books somewhere.
It has to be accounted for; that's why we call this accounting. :)