How to Depreciate Production Equipment
Recording monthly depreciation for extraction and processing machinery as a component of COGS.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Inventory - Work in Process | Asset | 2,200.00 | - |
| Accumulated Depreciation - Equipment | Contra-Asset | - | 2,200.00 |
💡 Accountant's Note
Depreciation on equipment used directly in the production or extraction of cannabis is includable in inventory costs and subsequently COGS. This helps optimize the tax position under Section 280E.
Practitioner & Systems Framework
💻 ERP Architecture
Associate production equipment assets with a 'Manufacturing' or 'Production' cost center to ensure depreciation hits the correct GL account.
⚠️ Audit Flags
Mixing production depreciation with administrative depreciation (e.g., office computers).
📄 Required Documentation
Fixed asset ledger, depreciation schedules, and equipment usage logs for production validation.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
Cannabis & Regulated Substances
IRC §280E — Complete Disallowance of Ordinary Business Expenses (Cannabis-Specific Tax Law)
Cannabis & Regulated Substances
§471 Inventory Cost Capitalization — Maximizing COGS for Cultivators Under §280E
Cannabis & Regulated Substances
Biological Assets — Growing Cannabis Plants at Fair Value (IAS 41 for Canadian Companies)
Discussion & Community Questions
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