Depreciationis a periodic transaction that normally reduces the value of the fixed asset in the balance sheet and is charged as an expenditure in a profit and loss account.

Therefore, a Ledger accountis usually used for crediting the periodic depreciation in the balance sheet and an Offset accountis an account in the profit and loss part of the chart of accounts.

Usually only a correction to an already posted depreciation transaction is posted as a Depreciation adjustment. Therefore, both the Ledger accountand Offset accountare set up the same way as the accounts for depreciation. A depreciation adjustment can be a positive or a negative amount, but the functionality of the Ledger account(as balance sheet account) and Offset account(usually as a profit and loss account) remains the same.

Extraordinary depreciationfunctions the same way as the basic depreciation does, which means that a Ledger accountis used to credit the depreciation amount to the balance sheet and reduces the value of the fixed asset, and an Offset accountis a profit and loss account, where the depreciation calculated for the accounting period is charged as an expenditure.

Extraordinary depreciationworks independently from the basic depreciation. Having Extraordinary depreciationas a separate transaction type allows you to post and report the extraordinary depreciation separately from the ordinary, basic depreciation.

You can use bonus depreciation to take extra depreciation amounts during the first year that an asset is placed in service and depreciated. Bonus depreciation only is available for depreciation books, not value models, and always is taken before any other depreciation calculations.

You can create an unlimited number of bonus depreciation records. After you assign them to an asset group depreciation book, they are applied to the asset depreciation book.

Bonus depreciation is entered as a percentage or a fixed amount. When you post depreciation proposals, bonus depreciation transactions are posted to the depreciation book as transactions that are separate from the depreciation transactions.

Currently in the United States, certain property qualifies as Section 179 property. The Section 179 deduction is the election to recover all or part of the cost of certain property, up to a limit, by deducting it in the year that you place the property in service. There is a new bonus depreciation deduction for the areas in the United States that were affected by the 2005 hurricanes. The additional 50% bonus depreciation after any Section 179 bonus amounts is for qualified Gulf Opportunity (GO) Zone property. The qualified assets must be placed in service after August 27, 2005. Refer to Publication 4492 from the Internal Revenue Service (IRS) for more information about the new bonus. There might be new bonus depreciation opportunities enacted in the future.