Depreciation Accounting – Dilapidations

Dilapidations. The term dilapidation refers to damage done to a building or other property during tenancy. When a property is taken on lease, is returned to the landlord he may ask the lessee as per agreement to put it in as good condition as it was at the time it was leased out. In orderlo meet cost of such dilapidation, a provision may be created by debiting the property account with the estimated amount of dilapidation and crediting the provision for dilapidations account. Depreciation may then be charged on the total cost of the asset so an-ivçd at Any payment made later on dilapidation may be debited to the provision for dilapidation account. The balance, if any, may be transferred to profit and loss account.