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Why you use accumulated depreciation and not reduce depreciation from asset directly?
Wiki User
∙ 15y ago
Basically the concept is to provide more detailed information and a method of checks and balances against the depreciation. The original acquisition cost of the asset is preserved this way and always appears until the asset is disposed. If you simply reduced the asset every year by the depreciation amount there would be less information for outsiders to understand why the asset keeps decreasing, or have the ability to distinguish whether you have new, low cost assets or a bunch of ancient assets which are almost completely depreciated.
Wiki User
∙ 15y ago
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Is Accumulated depreciation debit or credit?
Accumulated depreciation is a contra to related asset so if asset has a debit balance then it has credit balance to reduce the related asset's value.
What is the purpose of depreciation expense and accumulated depreciation?
Depreciation expense reduce the cost of asset through income statement for the useful life of asset and accumulated depreciation account is contra account for asset account in balance sheet to show the total amount of depreciation charged.
What is accumulated depreciation?
The accumulated deprecation is the all the depreciation amounts should be the accumulated depreciation.
The difference between the cost of an asset and the accumulated depreciation for that asset is called?
Book Value is the difference between the cost of an asset and the accumulated depreciation of that asset.
Is accumalted depreciation a liability?
No, even though accumulated depreciation has a credit balance, it is shown under assets. Accumulated depreciation is a contra T-account to a fixed tangible asset. For example, "Accumulated depreciation machines" is a contra T-account to "Machines". Contra T-accounts are presented together with the T-account they are connected with. Therefore, accumulated depreciation is shown on the debit side with assets. As it has a credit balance, the balance is subtracted. (The sign of a T-account 'flips' when the T-account is included on the opposite side on the balance sheet.)
Do accumulative depreciation has a debit balance?
Accumulated depreciation is a contra account to asset account to reduce the actual value of fixed asset so accumulated depreciation has a credit balance as a default balance which is reverse of fixed asset’s debit balance.
Does accumulated depreciation increase with a credit?
accumulated depreciation is an asset, so it will increase with a debit.
The Accumulated Depreciation's account balance is the sum of depreciation expense recorded in past periods true or false?
Yes. Accumulated depreciation is a contra asset account, which means it has an opposite balance from a normal asset account. It is used to reduce the balance whatever asset you are deprecating. When you total your assets on the balance sheet, you deduct the cost of Accumulated depreciation from your assets to get the true worth of your assets.
Where does the accumulated depreciation appear on?
Accumulated Depreciation is a liability nature of account to reduce the contra asset from balance sheet that's why it only shows in liability side of balance sheet to show reduction of asset.
What is accumulated depreciation on a statement of cash flow?
Accumulated depreciation is the amount of a long-term's asset's cost that has been allocated to depreciation since the time the asset was acquired.
How does depreciation expense on the income statement relate to accumulated depreciation on the balance sheet?
Depreciation expense on the income statement represents the portion of the asset's cost that is allocated as an expense during the reporting period. Accumulated depreciation on the balance sheet is a contra-asset account that reduces the asset's original cost by the total amount of depreciation expense recognized over its useful life. Thus, depreciation expense increases the accumulated depreciation balance on the balance sheet.
How is the net book value of a depreciable asset calculated?
The net book value of a depreciable asset is calculated by deducting the accumulated depreciation from the original cost of the asset. Accumulated depreciation is the total depreciation expense recorded over the life of the asset. This calculation allows for the determination of the asset's value at a specific point in time.
