What account 0200 is for
A machine tool and a car both wear out as the years go by. This wear has to be charged to expenses every month, but without changing the item's initial cost in 0100. That is why depreciation is accumulated in a separate account, 0200. Under paragraph 24, it brings together the depreciation of fixed assets owned by the organisation and of those received under a finance lease.
A contra-asset account: what that means
In the chart of accounts, 0200 has type "KA" (contra-asset). Under paragraph 3 of NAS No. 21, a contra-asset account is deducted from the balance of the related asset account and shows the net value of the asset in the financial statements. Put simply:
| Item | Where |
|---|---|
| Initial cost | Debit balance of 0100 |
| Accumulated depreciation | Credit balance of 0200 |
| Carrying amount | 0100 − 0200 |
0200 works opposite to the asset: it is credited when depreciation is charged and debited when an item is disposed of (paras. 29 and 31).
Sub-accounts
| Sub-account | Depreciation of which items |
|---|---|
| 0211 "Depreciation of land improvements" | Improvements in 0111 |
| 0212 "Depreciation of improvements to fixed assets received under finance lease" | Improvements in 0112 |
| 0220 "Depreciation of buildings, structures and transmission equipment" | 0120 |
| 0230 "Depreciation of machinery and equipment" | 0130 |
| 0240 "Depreciation of furniture and office equipment" | 0140 |
| 0250 "Depreciation of computer equipment and computing hardware" | 0150 |
| 0260 "Depreciation of vehicles" | 0160 |
| 0270 "Depreciation of working animals" | Working animals in 0170 |
| 0280 "Depreciation of perennial plantings" | 0180 |
| 0290 "Depreciation of other fixed assets" | 0190 |
| 0299 "Depreciation of fixed assets received under finance lease" | Leased items in 0310 |
Under paragraph 27, 0211–0290 keep the depreciation of items owned by the organisation, and under paragraph 28, 0299 keeps the depreciation of items received under a finance lease. Note: there is no depreciation sub-account for "Land".
Which items are not depreciated
Paragraph 26 gives the full list:
- land plots, and also natural resource use objects: water, mineral resources and other natural resources;
- productive livestock;
- information and library collections;
- fixed assets transferred into conservation in the established manner;
- museum objects;
- tangible cultural heritage objects;
- public roads, footpaths, promenades and alleys, and improvement structures under the control of local authorities;
- fully depreciated fixed assets.
What goes to the credit side
Under paragraph 29, depreciation charged is recorded on the credit of 0200 in correspondence with expense accounts. The debit account depends on where the item is used (table in para. 32):
| Where the item is used | Debit |
|---|---|
| Primary and auxiliary production, service facilities | 2010, 2310, 2710 |
| General production purposes | 2510 |
| A trading organisation | 9410 |
| Administrative purposes | 9420 |
| Launching new products and mastering a new technological process | 9430 |
| Working animals (0270) and perennial plantings (0280) | expense accounts |
| An item leased out under an operating lease (at the lessor, para. 30) | 9430 |
If the value is increased on revaluation, depreciation is also increased (Dr 8510). The depreciation of an item used in construction is added to capital investments, to 0810 (para. 75).
What goes to the debit side
Under paragraph 31, when an item is removed from the balance sheet, the depreciation accumulated on it is transferred from the debit of 0200 to the credit of 9210. If a finance lease item passes into ownership, the depreciation in 0299 is moved to the relevant sub-account 0211-0290 (para. 37; para. 32, row 9). If the lease ends and the item is returned to the lessor, 0299 is debited and 0310 credited (para. 32, row 10). If the value is reduced on revaluation, depreciation is also reduced (Cr 8510).
Points to watch
- The accounting policy sets the method. Under paragraph 25, the methods of calculating depreciation are set in the organisation's accounting policy. Writing the chosen method into the accounting policy follows from this requirement.
- Depreciation does not reduce 0100. When depreciation is charged, the balance of 0100 does not change; the reduction builds up only on the credit of 0200.
- Two entries on disposal. When an item is sold or liquidated, its initial cost goes from 0100 to the debit of 9210 (para. 10), and the accumulated depreciation from 0200 to the credit of 9210 (para. 31). After that, 9210 shows the carrying amount.
- Preparing a monthly depreciation calculation sheet by item and comparing its total with the credit turnover of 0200 helps to catch errors early (practical tip).
Main journal entries 11
Debit and credit are as in the model table of Appendix 2 to NAS No. 21. The transaction text briefly restates the table row.
| Transaction | Debit | Credit | Source |
|---|---|---|---|
| Depreciation charged on fixed assets in primary and auxiliary production and service facilities | 2010, 2310, 2710 | 0211–0299 | NAS No. 21, para. 32, row 1 |
| Depreciation charged on fixed assets used for general production purposes | 2510 | 0211–0299 | NAS No. 21, para. 32, row 2 |
| Depreciation charged on fixed assets used in a trading organisation | 9410 | 0211–0299 | NAS No. 21, para. 32, row 3 |
| Depreciation charged on fixed assets used for administrative purposes | 9420 | 0211–0299 | NAS No. 21, para. 32, row 4 |
| Depreciation charged on fixed assets leased out under an operating lease (at the lessor) | 9430 | 0220–0299 | NAS No. 21, para. 32, row 8 |
| Depreciation of fixed assets used in construction included in capital investments | 0810 | 0211–0299 | NAS No. 21, para. 75, row 1 |
| After a finance lease item passed into ownership, the depreciation accumulated on it moved to the relevant sub-account | 0299 | 0211–0290 | NAS No. 21, para. 32, row 9 |
| Depreciation of an item returned at the end of the lease term written off | 0299 | 0310 | NAS No. 21, para. 32, row 10 |
| Depreciation increased when the value was increased on revaluation | 8510 | 0211–0299 | NAS No. 21, para. 32, row 11, sub-row a) |
| Depreciation reduced when the value was reduced on revaluation | 0211–0299 | 8510 | NAS No. 21, para. 32, row 11, sub-row b) |
| Depreciation accumulated on an item removed from the balance sheet written off | 0211–0290 | 9210 | NAS No. 21, para. 32, row 12 |
Example
"Nurobod non" LLC (a fictional bakery) has chosen the straight-line method in its accounting policy (this choice is for the example; each organisation sets the method itself). Residual value is not taken into account. Position at the start of the month:
| Item | Sub-account | Initial cost, soums | Useful life | Accumulated depreciation, soums |
|---|---|---|---|---|
| Bread baking line | 0130 / 0230 | 144,000,000 | 120 months | 36,000,000 |
| Production workshop building | 0120 / 0220 | 360,000,000 | 300 months | 72,000,000 |
| Office computers | 0150 / 0250 | 18,000,000 | 36 months | 6,000,000 |
| Old van | 0160 / 0260 | 96,000,000 | — | 90,000,000 |
At the start of the month 0100 totals 618,000,000 soums and 0200 totals 204,000,000 soums.
Monthly depreciation: line 144,000,000 ÷ 120 = 1,200,000; building 360,000,000 ÷ 300 = 1,200,000; computers 18,000,000 ÷ 36 = 500,000 soums.
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | Depreciation of the bread line (primary production) | 2010 | 0230 | 1,200,000 |
| 2 | Depreciation of the workshop building (general production) | 2510 | 0220 | 1,200,000 |
| 3 | Depreciation of the office computers | 9420 | 0250 | 500,000 |
| 4 | The old van liquidated on the 1st of the month: initial cost written off | 9210 | 0160 | 96,000,000 |
| 5 | Depreciation accumulated on the van written off | 0260 | 9210 | 90,000,000 |
Sources of the entries: 1 — para. 32, row 1; 2 — para. 32, row 2; 3 — para. 32, row 4; 4 — para. 23, row 13; 5 — para. 32, row 12. Since the van was liquidated at the start of the month, no depreciation was charged on it this month in the example. The 6,000,000 soums remaining in 9210 is the van's carrying amount; the result of the liquidation is determined in this account (para. 392).
Position at the end of the month:
| Item | Calculation | Amount, soums |
|---|---|---|
| 0100 | 618,000,000 − 96,000,000 | 522,000,000 |
| 0200 | 204,000,000 + 2,900,000 − 90,000,000 | 116,900,000 |
| Carrying amount | 522,000,000 − 116,900,000 | 405,100,000 |
Check: monthly depreciation 1,200,000 + 1,200,000 + 500,000 = 2,900,000 soums. The disposal of the van reduced the carrying amount by only 6,000,000 soums, because most of its value had already gone to expenses as depreciation (example prepared by the author).