How Do You Account For Accumulated Depreciation?
• Familiarize yourself with what accumulated depreciation is. Accumulated depreciation is the total amount of an asset’s cost that has been allocated as depreciation expenses. Accumulated depreciation is a “contra-asset” account, meaning it is an asset account with a credit balance, and it cuts against the values recorded in the associated asset accounts. • Discover what accumulated depreciation is not. This account should not be approached as a valuation method; it is an allocation method. Long-term assets (such as buildings) will see their value fluctuate with market conditions. Depreciation is not intended to track this value; it is intended to move the cost of an asset gradually over to the income statement as an expense. • Determine your yearly depreciation expense. For example, imagine your firm purchases a piece of machinery for $10,000 (note that this example will work equally well with other currencies). The machinery is expected to last 10 years and has no salvage value. Usin
