How to Record Depreciation in Xero (2026 Guide)

Quick answer

Record depreciation in Xero by keeping the fixed asset register current and clicking Run depreciation from the Fixed assets screen at each period end: Xero calculates the period’s charge for every registered asset by its method and rate, and posts the journal in one action. The register does the arithmetic; your work is registering assets promptly, choosing methods that match your accounting and tax policy, and reviewing the run before confirming it.

The register is the engine

Depreciation in Xero flows from the fixed asset register, not from freehand journals. Anything coded to a fixed asset account when recording a bill surfaces as a draft asset waiting to be completed: description, purchase details, depreciation method, rate or useful life, and start date. Registering it puts it in scope for every future run. That automatic draft creation is a quiet control: reconcile the register against the fixed asset accounts monthly and unregistered drafts stand out immediately, each one an asset the ledger owns but no depreciation touches. A capitalisation policy (the threshold below which purchases are just expensed) keeps the register meaningful; a register full of staplers depreciates nothing worth tracking.

Choosing methods and rates

Xero supports straight line, declining balance at your chosen percentage, and full write-off at purchase, with regional editions adding pooling and statutory rate options where local tax rules define them. The choice is policy, not preference: your accountant sets book methods to reflect how assets are consumed, and tax rules may prescribe different rates or immediate deductions for the tax computation. Where your edition supports separate book and tax values, record both on the asset rather than keeping tax depreciation in a spreadsheet on the side. Jurisdiction specifics (instant write-off thresholds, capital allowance regimes, vehicle caps) are covered in the capital allowance glossary entry and on our country tax pages; the register is where whatever policy applies gets encoded once.

Running, reviewing, rolling back

1. At period end, open Accounting, then Fixed assets, and choose Run depreciation.
2. Select the month (or months) to depreciate to.
3. Review the preview per asset before confirming. New assets appearing for the first time and assets nearing fully depreciated status are where surprises live.
4. Confirm. Xero posts the depreciation journal: expense debited, accumulated depreciation credited, per asset type account settings.
5. If the run was wrong (an asset misregistered, a rate mistyped), roll back to the date before the error, fix the asset, and re-run. Rollback reaches back at most to the fixed asset start date and one financial year at a time.

Depreciation runs belong on the month-end checklist after all asset purchases for the month are posted, or the run misses the newest assets.

Disposals and revaluations

Selling or scrapping a registered asset goes through the asset’s disposal action, never a manual journal: enter the disposal date and proceeds, and Xero trues up depreciation to that date and posts the gain or loss automatically. Trade-ins are a disposal plus a new asset registration, with the trade-in value as proceeds on one and part of cost on the other. Revaluations and impairments, where policy requires them, do need journals; make them with your accountant, and adjust the asset’s book value in the register to match so the two records stay in step.

Common mistakes

• Draft assets never registered, so the ledger holds assets the depreciation run cannot see.
• Depreciation journaled by hand alongside the register, double-charging the months where both happened.
• Rates set from memory rather than policy, discovered at year end when the tax computation disagrees.
• Disposals recorded as bank receipts coded to a sundry account, leaving the asset alive in the register.
• Running depreciation before the month’s asset purchases are posted, then wondering why the new machine has no charge.

Software that helps

• Xero fixed assets does the calculation, posting, rollback, and disposal arithmetic natively.
• ExpenseFlow feeds the register’s front door: equipment invoices are captured and coded to the right asset accounts in Xero with the document attached, so draft assets carry the purchase evidence the registration step needs.
• Your accountant’s asset policy (thresholds, methods, tax elections) is the input that makes the module’s output defensible.

Related guides

Asset purchases enter through supplier bills; the posting mechanics behind the module are plain journal entries; the run itself lives in the month-end rhythm. Concepts: depreciation, fixed assets, capital expenditure.