Accumulated Depreciation

Accumulated depreciation is an account used to track the cumulative depreciation expense for a company’s assets. It is calculated by taking the accumulated depreciation expense for each asset and adding it to the depreciation expense for the period.

Formula for accumulated depreciation:

Accumulated depreciation = Total depreciation expense - Current depreciation expense

Explanation:

• Total depreciation expense: The total amount of depreciation expense that has been accumulated for all assets in the company’s fleet.
• Current depreciation expense: The depreciation expense for the period.
• Accumulated depreciation: The total amount of depreciation expense that has been accumulated for all assets in the company’s fleet.

Uses of accumulated depreciation:

• To calculate the current book value of an asset.
• To calculate the depreciation expense for a future period.
• To adjust the cost of an asset for inflation.

Example:

A company has a fleet of cars with a total cost of $100,000. The company depreciates the cars at a rate of 10% per year. After three years, the accumulated depreciation expense is $30,000. The current depreciation expense for the year is $10,000. Therefore, the accumulated depreciation expense is $30,000 – $10,000 = $20,000.