How to Record Monthly Depreciation on Retail Store Leasehold Improvements
Recognizing one month's depreciation on the store fit-out asset over the lease term.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Depreciation Expense (Store Fit-Out) | Expense (+) | 1,333.00 | - |
| Accumulated Depreciation (Leasehold) | Contra-Asset (+) | - | 1,333.00 |
💡 Accountant's Note
An JOD 80,000 fit-out over a 5-year lease generates JOD 1,333/month depreciation — a significant fixed cost that must be covered before the store is profitable.
Practitioner & Systems Framework
💻 ERP Architecture
Depreciation begins on the store opening date (when the asset is available for use) — not the completion date of construction. Set the depreciation period to the shorter of: the remaining lease term, or the asset's physical useful life. Review annually — if the lease is extended, the depreciation period can be extended accordingly. An impairment assessment is required if the store's performance declines significantly.
⚠️ Audit Flags
The depreciation period must not exceed the remaining lease term without a contractually guaranteed renewal. Auditors also check the impairment assessment — a store that is consistently loss-making may have a leasehold improvement asset with a recoverable amount below its net book value, requiring impairment recognition.
📄 Required Documentation
Fixed asset register (cost, useful life, depreciation start date, monthly charge), lease agreement confirming term, accumulated depreciation roll-forward, annual useful life review, and impairment assessment for underperforming stores.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.