Asked in
Business & Finance
Business Accounting and Bookkeeping
Financial Statements

How are accumulated depreciation and depreciation expenses similar?

Answer

User Avatar
Wiki User
September 07, 2007 7:46AM

When a fixed asset is purchased it is not expensed all at once. It is capitalized (recorded as an asset on the balance sheet) and expensed (on the income statement) over it's lifetime. The portion of fixed asset cost that is expensed each year is depreciation expense. Accumulated depreciation is the cumulative total of depreciation expense taken each year from the beginning of time against assets that are still owned. The accumulated depreciation account is a balance sheet account that offsets the fixed asset balance sheet account. The net amount of these two accounts is the book value of fixed assets.