The purchase of equipment that will be used in a business is not reported on the profit and loss statement. However, the depreciation of the equipment will be reported as depreciation expense on the profit and loss statements during the years that the equipment is used.

For example, if a company buys equipment for $100,000 and it is expected to be used for 10 years, the company’s profit and loss statements will report depreciation expense of $10,000 in each of the 10 years (assuming the straight-line method of depreciation is used).

The purchase of equipment is shown on the statement of cash flows for the period in which the purchase took place. The equipment will also be reported on the company’s balance sheets at its cost minus its accumulated depreciation.

The profit and loss statements are also known as income statements, statements of operations, and statements of earnings.

Learn more about the Income Statement.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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