Accumulated Depreciation
Accumulated depreciation is the total amount of depreciation expense that has been recorded against a fixed asset since it was put into service. It reduces the asset's book value on your balance sheet.
Accumulated Depreciation Definition
Accumulated depreciation is the running total of depreciation expense recorded against a fixed asset over its useful life. It's a contra-asset account — it reduces the gross value of the asset on your balance sheet to show its current book value (net of wear and tear).
How Accumulated Depreciation Works
Example: You buy a delivery van for $40,000 with a 5-year useful life and no salvage value.
Why It Matters
Accumulated depreciation affects your balance sheet (asset values), your P&L (depreciation expense), and your taxes (depreciation is a deductible expense that reduces taxable income without costing you cash).
How It Shows Up in QuickBooks
QuickBooks tracks accumulated depreciation as a contra-asset account under Fixed Assets. You record depreciation via journal entries (debit Depreciation Expense, credit Accumulated Depreciation) — typically monthly or annually.
FAQ
Q: Is accumulated depreciation the same as depreciation expense?
A: No. Depreciation expense is the current period's charge (income statement). Accumulated depreciation is the cumulative total of all past depreciation charges (balance sheet).
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