Vehicle Depreciation Entry

by Kyle
(St Catharines, ON)

How to Record Vehicle Expenses

How to Record Vehicle Expenses

Let's say I calculated the 30% depreciation on my vehicle (3rd year), which equals $5,000.


My business portion of the vehicle is 80%.

Do I enter the full $5,000 in the books (Depreciation Expense + Accumulated Depreciation) or $4,000 (80% x $5000).

I know on the tax form, only $4,000 will be allowed, but I forget which way to do it on the company books.

Thanks, Laura!



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Hi Kyle,

What I do is enter the vehicle expenses at 100%. I have a sub-account called "Personal Use Adjustment". I book the personal use compenent, 20% in your case, there so that only the 80% business portion is now reflected in the bottom line.

One reason I do it this way is to make data entry to the T2125 form easier as it requires expenses to be entered at 100% and the tax software backs out the personal portion. It also makes it easier in an audit to match the receipt to the expense booked.

Hope that helps Kyle.



P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for Vehicle Depreciation Entry

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Feb 15, 2013
 Amortization - Depreciation
by: Kyle

So if the asset's value is $16,666.67, the depreciation is 30% or $5,000. But on the books we essentially put in $4,000.

So next year, we would take depreciation on $12,666.67, or $11.666.67? That's the part that I'm not sure of.

Thanks again, Laura. You're great!



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Kyle,

Depreciation is a bit different. Read this post on CCA. It explains the difference between book versus tax accounting.

Generally, if you are a small privately owned business or a sole proprietorship, and have no debt, I would match/record the depreciation/amortization claimed on your tax return in your books. For a small business, this keeps things uncomplicated and there is less to reconcile. Be aware though that you will be veering away from GAAP.

If you have third party debt, it is very important to disclose in your financial how you calculated your amortization so as to not mislead your banker or debtor.

If you still have a question after reading the CCA chat, post back here.
Feb 24, 2013
 clarification
by: Kyle

Your account "Personal Use Adjustment", where would I put that, under expenses or under Accumulated Depreciation? Thanks.



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A sub account under Vehicle Expenses.

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