Depreciation

Ledger 2 expenses measure the outflow of funds that are used up, or consumed, in the process of generating revenues during a fiscal year. If an equipment purchase or renovation cost that provides a benefit over several years were recorded as an expense in the year paid, that fiscal year's measurement would be distorted. Therefore, the purchase of equipment or the cost incurred to construct or renovate space is recorded in Ledger 8 (Plant funds). Periodically, a depreciation charge is recorded in the recharge operation's Ledger 2 account. The depreciation charge records in Ledger 2 the benefit received from the use of the equipment, construction or renovation expenditures. The depreciation expense is recorded in subaccount 9477. See Section VI, Depreciation Methods, for a discussion of the various methods used to calculate this expense. Also, see Appendix E, Recharge Operation Equipment & Renovation Expenditure Accounting Protocol, for more detailed transaction information.