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.
- in which Category (Assets, Liabilities, …) should they be located
- what is the accounting logic for them
- 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?