What is depreciation and why does it matter?
Depreciation represents the reduction in value of a long-term asset, like a piece of equipment or a vehicle, over the useful lifetime of that asset. From a bookkeeping perspective, it helps you:
Reflect a more accurate value of your assets on your balance sheet
Recognize the expense of purchasing that asset over time instead of all at once
Lower your taxable income by recording depreciation expense on your Profit & Loss
Most farms and ranches depreciate equipment, vehicles, and buildings over several years.
Do I need to track depreciation in Ambrook?
Most of the time, your accountant will manage the depreciation schedule for your assets and make the appropriate adjustments to your balance sheet and profit & loss at the end of each year. However, if you want to track your depreciation yourself for any reason, it is possible in Ambrook and this article will walk through options and the steps to do so.
Add your assets to Ambrook using their cost basis
Before you can track depreciation, make sure you’ve added your fixed assets to the Balances page.
When setting up an asset (like a vehicle, trailer, or structure), use the original purchase price (cost basis)—not the current depreciated value. For assets you bought in the current year, or after starting your books on Ambrook, see the steps in our Asset Purchases article for how to add them to your balance sheet.
To add assets you’ve had since before starting your books on Ambrook:
Go to the Balances page
Click New Account
Choose an asset account type such as Vehicle, Structure, or Equipment
Name the account (e.g. “001 - John Deere Tractor”, or “Ford F150”)
Enter the Starting Balance as the original purchase price
Enter the Starting Date as the date you started your books in Ambrook
Click Create to save the account
Repeat this for each asset you want to track. For more information on adding assets, see our articles on Adding Balance Sheet Accounts and tagging Asset Purchases (for assets you’ve bought since starting on Ambrook).
How to track depreciation on Ambrook
There are two main options for tracking depreciation on Ambrook depending on how detailed you’d like to be.
1. Track total accumulated depreciation across all asset accounts
Use one account for tracking all of your depreciation. This is the most common way of tracking depreciation.
Steps:
Go to the Balances page
Click New Account
Choose Accumulated Depreciation as the account type
Name: Name the account (e.g., “Total Accumulated Depreciation”)
Starting Balance: If you had depreciation before your books began in Ambrook, enter the starting balance as that depreciation amount.
Starting Date: The date you’re starting your books in Ambrook.
Direction: Make sure the direction of the account is set to Contra-Asset
Click Create
2. Track depreciation by individual asset
Create a separate accumulated depreciation account for each asset to track depreciation individually.
Steps:
Go to the Balances page
Click New Account
Choose Accumulated Depreciation as the account type
Name the account based on the related asset (e.g., “001 - Accumulated Depreciation” or “Accumulated Depreciation - Trailer”)
Starting Balance: If you had depreciation before your books began in Ambrook, enter the starting balance as that depreciation amount.
Starting Date: The date you’re starting your books in Ambrook.
Direction: Make sure the direction of the account is set to Contra-Asset
Click Create
Repeat these steps for each asset you want to track depreciation for.
Recognizing depreciation expense on your Profit & Loss
Once you've set up your accumulated depreciation account, you can use a journal entry to record depreciation on the balance sheet and your depreciation expense on your profit & loss.
Typically, you’ll record depreciation once a year as an end of year adjustment, but you could also create journal entries on a monthly or quarterly basis if you wanted to update depreciation more frequently.
To record depreciation via a journal entry:
Go to the Ledger
Click New -> Journal Entry
Add a line to Debit the Depreciation Expense account (this is an expense account on your Profit & Loss)
Add a second line to Credit the Accumulated Depreciation account (this is a contra-asset account on your Balance Sheet)
Example journal entry:
Date | Description | Account | Debit | Credit |
12/31/2024 | Depreciation for Fixed Assets 2024 | Depreciation Expense | $2,500 |
|
12/31/2024 | Depreciation for Fixed Assets 2024 | Accumulated Depreciation |
| $2,500 |
If you’re tracking for each asset individually, you can duplicate this journal entry for each asset by clicking the three dots at the top of the first journal entry -> duplicate, or combine them into one entry with multiple lines.
Frequently asked questions
Should I use the purchase value or depreciated value as the starting balance when entering my assets?
Use the original purchase value (cost basis). The depreciated value will be tracked using the sum of the fixed asset account and the accumulated depreciation account.
How do I know how much to depreciate each year?
Your accountant will have a depreciation schedule for each of your assets that details the depreciation amount per asset per year. This is typically calculated by dividing the purchase price by the asset’s useful life (e.g., 7–20 years). Use your accountant’s depreciation schedule to stay consistent.
Where can I find my depreciation schedule?
It’s typically included in your most recent tax return, at the very end.
Can I track depreciation during the course of the year?
Yes. Just create a new journal entry periodically (monthly, quarterly, annually) to reflect ongoing depreciation. Recording depreciation annually is the most common.