What Is the Difference Between Depreciation & Accumulated?

Calculating Depreciation

Depreciation is the decrease in an asset's value over the useful life of an asset. Accumulated depreciation is the amount of depreciation so far recorded during an asset's life.

Depreciation

Depreciation records how much an asset declines in value over a year. The most common type of depreciation is straight-line depreciation. Depreciation is an expense account.

Accumulated Depreciation

Accumulated depreciation is a contra-account. Although it is recorded as an asset, it actually deducts from an asset account. Take, for example, accumulated depreciation on a truck. The truck is worth $50,000 and has $10,000 of accumulated depreciation. The book value of the truck is therefore $40,000.

Financial Statements

Depreciation is accounted for on the income statement.

Placement of Accumulated Depreciation

Accumulated depreciation is a contra-account asset on the balance sheet.

Interrelation of Depreciation and Accumulated Depreciation

When recording depreciation, the journal entry is debit depreciation expense and credit accumulated depreciation. For example, if there was $4,000 of depreciation during the year, the journal entry is debit depreciation expense $4,000 and credit accumulated depreciation $4,000.

References

• Investopedia: Depreciation
• Accounting Coach: Depreciation