I am a bookkeeper to balance sheet here in south Africa. I am doing the books for a holding company with a sub company. I would like to know how to report on each company on their own and how to report on the inter company loan account. I would also like to know what is the proper enty for depreciation and accumulative depreciation.
I know that depreciation is a debit and is an income statement account. Does this mean the the Accumulative depreciation will be a credit and then be reflected in the balance sheet?
Part of it depends on whether or not there are separate companies.
If not you can account for them using classes. If they are you must keep a different set of books for each company. YOu can then set up an account for Intercompany Transfers. It doesn't really matter if it is an asset or a liability account. What may decide that is whether one company is more likely to "borrow" from the other. The more frequent "borrower" would most likely be the one to have it as a liability account, and the "lender" the asset.
When you transfer goods or cash, the offsetting account to the cash or inventory credit would be a debit to the Interco for the lender. The borrower would credit the Interco account to offset the debit to cash or inventory. When the "borrower" pays back the "lender" do the reverse.
Depreciation (or amortization) is the process by which an asset has its value distributed to expense over the useful life of the asset. You must determine the method used for depreciation, and there are several: straight line (expneses an equal amount to depreciation expense through the useful life of the asset), declining balance (uses a gradually reducing amount to depreciation), sum of years (uses a gradually increasing amount), units of production (depreciation based on a set amount per unit of production) and sinking fund (assigns the depreciated amount to a fund designed to save money to purchase replacement assets). This can get complicated, and different tax rules apply to which you may use for tax purposes as opposed to financial reporting.
When you depreciate capital assets, you record the original amount of the asset in an asset account, an you record the Accumulated Depreciation in a contra-asset account for EACH asset category (computer equipment, vehicles, equipment, office equipment, furniture & fixtures, etc.). YOu match the depreciation expense amount and record the credit side to the Accumulated Depreciation for that asset. So, the Accum Depn does indeed appear on the Balance Sheet.
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