Asset Depreciation - What is an "Accumulated Depreciation Account"?

ERPNext Accounting
1

I am exploring fixed Asset Depreciation at the moment and am looking at the Asset Category

In the ACCOUNTS section there are 4 accounts to be defined. and I don’t quite get what the “Accumulated Depreciation” & “Capital Work in Progress” are used/needed for. I see there are Account Types that match those exactly.

  1. in which Category (Assets, Liabilities, …) should they be located
  2. what is the accounting logic for them
  3. do you technically need them in order to book Asset depreciations

I totally get that you need an Asset account which shows the value of the Machine at a certain point in time, and an expense account where you write off the depreciated value to each month (or whatever period you are using). From my point of view these 2 are sufficient.

Can someone explain what those other 2 are required for?

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2

Hi

Refer this Doc
https://docs.erpnext.com/docs/user/manual/en/asset/asset-depreciation

3

accumulated depreciation is an asset account classified as depreciation account in the COA

4

what’s the logic behind this? There is an Asset Account that stores the value of an asset at the time of purchase. This value needs to be reduced with every asset Depreciation.

As far as I understand the accounting logic you can reduce the value of an Asset account with either an expense account or a liability account.

So how does another Asset account fit in here?

5

Hi,
I invite you to read about fixed assets accounting, short answer to your question is accounting convention and standards.

Rgds
Nofal