Accumulated depreciation
Accumulated depreciation is the running total of all depreciation charged against a non-current asset since purchase, held in a contra-asset account; subtracting it from the asset's cost gives the carrying (book) value.
FrameworkDepreciation
See it move
Machinery bought for €50,000 is depreciated straight-line at €10,000 a year over a five-year life. After three years, accumulated depreciation — a contra-asset account with a credit balance — has reached €30,000, leaving a carrying value of €20,000. The original cost stays visible on the balance sheet; only the deduction against it grows.
The formula
Variables
- original acquisition (historical) cost of the asset (€)
- total depreciation charged since the date of acquisition (€)
Accumulated depreciation grows by the annual depreciation charge each period. It can never exceed the depreciable cost (cost minus residual value).
Check yourself
A machine was purchased for €80,000 and has been depreciated on a straight-line basis at €16,000 per year for three years. Which figures correctly appear on the balance sheet at the end of year three?