Where Does an Equipment Purchase Appear on the Income Statement
Purchases of equipment do not directly appear on the income statement. Instead, they are usually capitalized as assets on the balance sheet and then depreciated over their useful lives. The depreciation expense related to the equipment is what appears on the income statement.
Balance Sheet:
When you purchase equipment, you increase a long-term asset account, usually named something like “Property, Plant, and Equipment” or simply “Equipment.” This reflects the economic benefit that the equipment will provide over its useful life.
Income Statement:
The equipment itself does not appear here, but the depreciation expense does. Depreciation is a way of allocating the cost of the asset over its useful life. Each accounting period, a portion of the cost of the equipment is moved from the balance sheet to the income statement as a depreciation expense.
