Recording Depreciation: Direct to Asset Account vs Provision for Depreciation Account

Depreciation can be recorded in a business's books in one of two ways:

1. Charging depreciation directly to the Asset Account — the older, simpler method: Depreciation A/c Dr; To Asset A/c. The Asset Account itself is credited every year, so its balance (shown in the Balance Sheet) is always the NET BOOK VALUE (original cost less all depreciation charged so far, directly built into the one account). The original cost of the asset is not separately visible from the ledger once depreciation has been charged.
2. Creating a Provision for Depreciation Account (also called an Accumulated Depreciation Account) — the more commonly used method today: Depreciation A/c Dr; To Provision for Depreciation A/c. Here, the Asset Account is NEVER credited for depreciation and continues to show the asset at its ORIGINAL COST throughout its life. The Provision for Depreciation Account accumulates the total depreciation charged so far (a running total, growing every year), and is shown in the Balance Sheet as a DEDUCTION from the asset's original cost — the difference between the two, of course, still gives the same net book value as method (a) would.