Where to Add Accumulated Depreciation Accounts and Why They Can’t Be Assets

To ensure that the Accumulated Depreciation account and Depreciation Expense account appear when adding an asset classification, these accounts must be set up correctly

First: Adding an Accumulated Depreciation Account

Path to Add

Dropdown Menu → Accounting → Chart of Accounts

Steps to Add

1. From the Chart of Accounts, navigate to Liabilities.

2. Click on the ( + ) sign to expand Liabilities.

3. Click on ( + ) next to Current Liabilities.

4. Enter the account data as follows:

   • Account Type: Accumulated Depreciation (Required)

   • Account Nature: Credit

   • Account Name (Arabic): مجمع إهلاك

   • Account Name (English): Accumulated Depreciation

5. Click Continue to save the account.

Important Notes

• Selecting the Accumulated Depreciation account type is required.

• If the account is added outside of Current Liabilities or with a different type:

  • The account will not appear when adding an asset.

• Placing Accumulated Depreciation within Liabilities is a systematic organization due to its credit nature, and does not change the accounting treatment of the asset.

Second: Adding a Depreciation Expense Account

Path to Add

Dropdown Menu → Accounting → Chart of Accounts → Expenses

Steps to Add

1. From the Chart of Accounts, navigate to Expenses.

2. Click on the ( + ) sign to add a new account.

3. Enter the account data as follows:

   • Account Type: Depreciation Expense

   • Account Classification: Expenses

   • Account Name (Arabic): مصروف إهلاك

   • Account Name (English): Depreciation Expense

4. Click Continue to save the account.

Important Note

• The Depreciation Expense account is not created automatically.

• It must be added manually so the system can use it when executing depreciation.

Third: Linking Accounts to Asset Classification

When adding an asset classification:

• You select:

  • Depreciation Expense account

  • Accumulated Depreciation account

This linking is necessary for the system to:

• Create depreciation entries automatically

• And direct the entry to the correct accounts

Fourth: What Happens When Executing Depreciation?

When executing the depreciation process:

• The system creates an automatic accounting entry:

  • From Depreciation Expense account

  • To Accumulated Depreciation account

• The asset appears at its original value.

• Accumulated Depreciation appears as a separate line item in reports.

  Note:
  The Accumulated Depreciation account cannot be added within the asset debit section because it is considered a credit account. The Accumulated Depreciation account is entered within Current Liabilities and is of type Accumulated Depreciation, because liabilities are accounts that carry a credit nature, and this is the procedure followed in the system.