When you record a purchase as a capital asset, rather than an expense, at the time of purchase, the expense of owning the item is spread over its expected useful life. This is depreciation.
For example, if you purchase a computer for $1,800 and expect to use it for 3 years, you would expense one-third of the cost as depreciation each year.
For more information on depreciation, or when to account for it, contact an accountant.
Create a depreciation account
- Log in at waveapps.com.
- On the left-side menu, click Accounting > Chart of Accounts.
- At the top right corner, click Add a New Account.
- For the Account Type, select Depreciation & Amortization.
- Name the account something relevant to depreciation.
- Click Save.
This account will be an offset to the value of the asset account. Wave automatically creates a Depreciation Expense account under Expenses in your chart of accounts.
Record depreciation
- Log in at waveapps.com.
- On the left-side menu, click Accounting > Transactions.
- At the top right, click Add transaction > Add journal entry.
- Enter a description and select the date.
- In the Debit column, for the category, click Depreciation Expense, and enter the amount.
- In the Credit column, for the category, click the depreciation account you created, and enter the same amount as the debit column.
- Click Save.