Accumulated Depreciation

tl;drA contra-asset account that represents the total amount of depreciation expense charged against an asset since its acquisition.

This running total reflects the cumulative wear, tear, and obsolescence of long-term assets, providing a realistic picture of their remaining book value. The account directly reduces the asset's gross value on the balance sheet to show its net book value. For example, a delivery company purchases a truck for $50,000 with an expected five-year life and no salvage value. Using straight-line depreciation, they record $10,000 annual depreciation expense, which accumulates in this account. After three years, the accumulated depreciation balance of $30,000 indicates that 60% of the truck's value has been expensed, leaving a net book value of $20,000. Managing accumulated depreciation involves choosing appropriate depreciation methods, estimating useful lives accurately, and regularly reviewing these estimates.