How to Find the Depreciation Expense on an Income Statement If the Amount Is Not Given

Depreciation expense is most often listed as a separate item on documents.

At the end of each accounting time period, a business wipes clean its revenue and expense accounts in order to prepare them for usage in subsequent periods. The values stored in these accounts are summed up as either a net income or a net loss, and then this value is relegated to retained earnings or some other account, depending on the business. Multiple categories of expenses exist, among them: operating expenses and cost of sales. "Cost of sales" is sometimes also called "cost of goods sold" or "cost of services," depending on the business; depreciation expense is one component of cost of sales.

Instructions

1. Find the section of the income statement that shows the cost of sales and its components. For most businesses, this section should be right after the revenues section but before gross profit and/or their operating expenses.

2. Find the component expenses of cost of sales, other than depreciation expense. Components of cost of sales should be listed under the heading "Cost of Sales" or whatever equivalent term the business is using. Components of cost of sales include items such as overhead expenses, wages paid for labor and other costs associated with the business's main revenue-producing activities.

3. Deduct component expenses from cost of sales in order to derive per-period depreciation expenses. The sum of cost of sales is most often called simply "Cost of Sales" or an equivalent term, and can be found at either the beginning or the end of the "Cost of Sales" section.

Tips & Warnings

• It is not possible to calculate per-period depreciation expenses as a component of cost of sales using the income statement alone if the other components are not listed on said document.

References

• IAS Plus: IAS 1, Presentation of Financial Statements
• IAS Plus: IAS 2, Inventories