Bookkeeping · Reconciliation & Close · Brief · Working level
The monthly depreciation entry between tax returns
How to book depreciation each month from the accountant's schedule, keep accumulated depreciation tied to it, and handle new assets bought mid-year before the next return.
Depreciation is computed in detail once a year, when your accountant prepares the return and Form 4562. But the expense belongs to every month the assets are in use, and books that only see depreciation as an annual December surprise mislead their readers for eleven months. The fix is mechanical: take the annual figure from the accountant's schedule, divide by twelve, post it monthly, and true up when the next schedule arrives.
The entry
Suppose last year's schedule shows current-year depreciation of 9,000.00 across all assets:
| Account | Debit | Credit |
|---|---|---|
| Depreciation expense | 750.00 | |
| Accumulated depreciation | 750.00 |
Credit the contra-asset, never the asset account itself — the balance sheet should keep original cost and accumulated depreciation visible separately.
Memorize it as a recurring entry; it runs unchanged until the next return resets the number. This is step 8 of the month-end close checklist.
Tying to the accountant's schedule
The depreciation schedule behind the return is the authority — asset, cost, date in service, method, life, prior depreciation, current-year depreciation. Once a year, when the new schedule arrives:
- Compare the schedule's total accumulated depreciation to your ledger's accumulated depreciation balance.
- Post a true-up entry for the difference (the twelve estimates never land exactly on the final figure, especially after Section 179 or bonus elections).
- Reset the monthly amount to one-twelfth of the new current-year total.
- Confirm every asset on your books appears on the schedule and vice versa — disposals are the usual mismatch.
Why estimates drift from the final schedule:
| Cause | Direction |
|---|---|
| Section 179 or bonus depreciation elected on new assets | Books under-depreciated, often substantially |
| Assets fully depreciated mid-year | Books over-depreciated after the stop date |
| Disposals not removed from the books | Books over-depreciated; ghost assets linger |
| MACRS conventions (half-year, mid-quarter) vs. straight division | Small drift either way |
The elections matter most: 100% bonus depreciation applies to qualified property acquired after January 19, 2025, so a new machine may be fully written off on the return while your books show a twelfth of a straight-line year. That is exactly what the annual true-up absorbs. The mechanics of methods, lives, and conventions are covered at /fundamentals/depreciation-basics, and the form itself line by line at /fundamentals/form-4562-walkthrough; the underlying rules live in Publication 946.
When monthly posting is not worth it
A business with one aging laptop does not need this machinery — an annual entry from the return is fine, posted before year-end statements. The monthly entry earns its keep when depreciation is large enough that its absence distorts monthly profit, or when a lender or partner reads interim statements. Either way, the discipline is the same one running through every account on the balance sheet: the ledger number must tie to a schedule somebody maintains — the theme of the whole reconciliation frequency guide.
Frequently asked questions
- Should I book depreciation monthly or once a year?
- Monthly, if anyone reads your statements during the year. Booking a year of depreciation in one December entry makes eleven months overstate profit and December crater. Take the accountant's annual depreciation figure from the last return, divide by twelve, and post the same entry each month, truing up when the next return is prepared.
- Where do I get the depreciation number for my monthly entry?
- From the depreciation schedule your accountant prepares with the tax return — the asset-by-asset listing behind Form 4562. Use the current-year depreciation column, divide by twelve, and post that monthly. Ask for the schedule every year; it is your fixed-asset subledger, and the books should tie to it.
- What do I do about assets bought mid-year, before the next tax return?
- Add the asset to your own fixed-asset list at cost, start a reasonable monthly estimate — straight line over a sensible life is fine — and flag it for the accountant. The next return's Form 4562 sets the real method and any Section 179 or bonus election; post a true-up so accumulated depreciation matches the new schedule.