Meaning & use
accumulated depreciation
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Meanings
noununcountablebusiness
The total amount of an asset's cost that a business has already written off as expense since the asset was bought.
Grammar: Used without an article: accumulated depreciation on equipment.
Patterns
- accumulated depreciation on something
- accumulated depreciation of $X
The delivery van cost $40,000 and has $25,000 of accumulated depreciation.
Accumulated depreciation is subtracted from cost to find an asset's book value.
The balance sheet lists accumulated depreciation under the equipment line.
noununcountabletechnical
A contra-asset account, shown as a negative figure, that records the running total of depreciation for a class of assets.
Grammar: Used as an accounting term, often with account.
Patterns
- an accumulated depreciation account
The accountant added this year's charge to the accumulated depreciation account.
When the machine was sold, its accumulated depreciation was removed from the books.
Accumulated depreciation grows each year until the asset is fully written off.
Common combinations
- record accumulated depreciation
- The company records accumulated depreciation every month.
- subtract accumulated depreciation
- Subtract accumulated depreciation from cost to get book value.
- accumulated depreciation account
- The accumulated depreciation account increased by $5,000.
- accumulated depreciation on equipment
- Accumulated depreciation on equipment was shown in the notes.
- net of accumulated depreciation
- Property is reported net of accumulated depreciation.
Synonyms and how they differ
- total depreciation
- Total depreciation is a plain description of the same idea, while accumulated depreciation is the formal accounting label.
- depreciation reserve
- Depreciation reserve is an older or British term for the same account, and may sound dated.
- cumulative depreciation
- Cumulative depreciation has the same meaning but is less common in financial statements.
- book value
- Book value is what is left after deducting accumulated depreciation from cost, so it is a related result rather than a synonym.
Word family
- depreciation noun
- the loss in value of an asset over time
- depreciate verb
- to lose value over time
- accumulate verb
- to build up gradually
- accumulation noun
- a gradual build-up
- amortization noun
- a similar process for intangible assets
Commonly confused: accumulated depreciation or depreciation expense?
accumulated depreciation vs depreciation expense
Depreciation expense is the amount charged in one period, while accumulated depreciation is the running total of all past charges.
Practice
A machine cost $20,000 and has accumulated depreciation of $8,000. What is its book value?
Choose one answer.
Book value equals cost minus accumulated depreciation, so $20,000 minus $8,000 is $12,000. The $28,000 option wrongly adds the two figures.
Make it your own
Write a sentence using “accumulated depreciation”, then check it and compare it with the examples above.