Accumulated Depreciation


DEFINITION of 'Accumulated Depreciation'




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BREAKING DOWN 'Accumulated Depreciation'

A company buys an asset for $5,000 that has a five-year lifespan and zero salvage value. The company uses straight-line depreciation, and the asset depreciates at a rate of $1,000 per year.

In year one, depreciation will be $1,000, as will accumulated depreciation, and carrying value of the asset will be $4,000.

In year two, depreciation will be $1,000, accumulated depreciation will be $2,000 ($1,000 from the current year + $1,000 accumulated from previous years) and carrying value will be $3,000.

Each subsequent year will follow the same process.

  1. Amortization

  2. Unit of Production Method

  3. Sum-Of-The-Years' Digits

    An accelerated method for calculating an asset's depreciation. ...
  4. Sinking Fund Method

    A technique for depreciating an asset in bookkeeping records ...
  5. Fully Depreciated Asset

  6. Salvage Value

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  2. How is depreciation related to the carrying value of a tangible asset?

    Depreciation is related to the carrying value of a tangible asset in that the latter is the original cost of the tangible ... Read Full Answer >>
  3. Why does accumulated depreciation have a credit balance on the balance sheet?

    Accumulated depreciation is increased with a credit entry, although it is shown on the asset side of the balance sheet. Following ... Read Full Answer >>
  4. What would cause a decrease in accumulated depreciation?

    When a company's accumulated depreciation decreases, it is normally due to the sale of a long-term fixed asset or group of ... Read Full Answer >>
  5. What happens to accumulated depreciation when you sell an asset?

    When a company sells an asset, its total accumulated depreciation is reduced by the amount related to that asset. The accumulated ... Read Full Answer >>
  6. What is the relationship between accumulated depreciation and depreciation expense?

    Accumulated depreciation is the total amount a company depreciates its assets, and depreciation expense is the amount a company's ... Read Full Answer >>
  7. What is considered to be a good fixed asset turnover ratio?

  8. How does accumulated depreciation affect net income?

    Accumulated depreciation does not directly affect net income but is instead the total amount of a company's depreciation ... Read Full Answer >>
  9. What is the tax impact of calculating depreciation?

    Depreciation, which is the decrease in the value of an asset or assets, reduces the amount of taxes paid in the form of depreciation ... Read Full Answer >>
  10. Does gross profit include depreciation or amortization?

    Gross profit (sometimes called "gross margin") represents a company's sales revenue minus its cost of goods sold – in other ... Read Full Answer >>
  11. What is the difference between amortization and depreciation?


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