USA Could someone please explain?

[Lightsout]

Could someone please explain what is meant by the text below? I don't get it.

" When property is retired its gross value is deducted from the property account, and the depreciation accrued against it to date is taken out of the depreciation reserve. This explains why the depreciation reserve on the balance sheet does not increase each year by the full amount charged for depreciation against earnings".


Thanks in advance.

 

[Triest123]

that means the carrying amount (the net book value) of the retired property would be written off.

The carrying amount (the net book value) of a fixed asset
= Costs (Gross value) - Accumulated depreciation (Depreciation reserve)

 

[Lightsout]

OK, thank you for your reply! Now I get that part..

still don't understand is why "depreciation reserve on the balance sheet does not increase each year by the full amount charged for depreciation against earnings".

if not the full amount, how much is charged instead? Is there a basic rule or does it differ in every case? How to find out?

Thanks in advance.

 

[Triest123]

OK, thank you for your reply! Now I get that part..

still don't understand is why "depreciation reserve on the balance sheet does not increase each year by the full amount charged for depreciation against earnings".

if not the full amount, how much is charged instead? Is there a basic rule or does it differ in every case? How to find out?

Thanks in advance.

=>That mean you don't need to provide depreciation any longer for the retired asset.