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1. Depreciation is normally an expense. You have to note the nature of this transaction. When you make a provision for depreciation of say, $20, to F & F with a cost of $100 and with accumulated depreciation b/f $40 , the entries will be Dr. Depreciation of F & F $20 ( P & L ) Cr. Provision for Depreciation for F & F ( Accumulated Depreciation) $20 ( B/S ). The presentation in B/S on F & F --- Cost $100 - Provision for Depreciation $ 60 ( $40 + $20 ) = Net Book Value $40. We normally use Depreciation in P & L and Provision for Depreciation in B/S.
2. For example, if the above asset is disposed for $10, we will make the following entries:
a. Dr. Disposal of F & F $100 ( Cost ) Cr. F & F $100 , being cost of F & F transferred to Disposal Account
b. Dr. Provision for Depreciation on F & F $60 Cr. Disposal of F & F $60, being accumulated depreciation of this F & F now transferred to Disposal account.
c. Dr. Bank $ 10 Cr. Disposal of F & F $10, being proceeds on disposal on this F & F.
d. The balance of this disposal account $100 - $60 - $10 = $30 will be reflected in the P & L Account as Loss on Disposal on F & F, an expense.
This example shows the entries affecting those accounts that you have mentioned.
