Question

What is accumulated depreciation?

This is for a financial analysis class, please use at least 130 words. Thank you!

Answer 1

Accumulated depreciation is the cumulative amount of depreciation of assets at some specific time of their life. It is totalling of depreciation of an asset till the present time of it's life.

The accumulated depreciation is deducted out of the purchase value of a company in order to arrive at the carrying value of an asset.

The asset is held till the salvage Value of an asset matches with the carrying amount of an asset.

The higher the rate of depreciation, the higher the amount of accumulated depreciation and Lower the rate if depreciation , lower the amount of accumulated depreciation.

The accumulated depreciation account is a contra asset account which lowers the total book value of Assets recorded on the balance sheet.

Analysts often create a depreciation schedule to track the overall asset depreciation over life of the asset.

This accumulated depreciation account always have a credit balance and is on increasing trend as depreciation is credited after periodic intervals.