Business Terms Glossary

Accumulated Depreciation

Definition of Accumulated Depreciation

Accumulated Depreciation is the total depreciation expensed to date for a given asset.

Depreciation is the reduction of the carrying amount of the assets on the balance sheet to reflect the loss of value due to wear, tear, and usage.

When companies purchase assets such as computers, copy machines, buildings, and furniture, those assets lose value over time. This depreciation loss must be accounted for in the company’s financial statements in order to give shareholders the most accurate portrayal of the economic realty of the business.

In accounting lingo, accumulated depreciation is considered to be a long-term contra asset account (an asset account with a credit balance). It is reported on the balance sheet under the heading Property, Plant, and Equipment.

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