Harness Money

What is accumulated depreciation?

Accumulated depreciation refers to the cumulative depreciation expense recorded over the useful life of an asset. Depreciation is an accounting method used to allocate the cost of an asset over its useful life. As an asset ages or is used, it generally experiences wear and tear, obsolescence, or a decrease in value. Accumulated depreciation reflects the total amount of these depreciated expenses that have been recorded for an asset since its acquisition.

The concept of accumulated depreciation allows businesses to spread out the cost of an asset over its useful life, matching the expense with the revenue it generates. It is recorded as a contra-asset account on the balance sheet, which means it is subtracted from the asset’s original cost to determine its net book value or carrying value. The net book value is an estimate of the asset’s current value after accounting for accumulated depreciation.