What is accumulated depreciation?

Accumulated depreciation is the sum of all recorded depreciation of an asset over time to a specific date. Depreciation is recorded to tie the cost of a long-term capital asset to the benefit gained from its use over time. Accumulated depreciation is presented on the balance sheet below the related capital asset line.

Does accumulated depreciation have a credit balance?

The accumulated depreciation account will have a credit balance, which is opposite to the normal debit balance of asset accounts. This is because it represents an offset to the asset’s value. Accumulated depreciation is an important component of a business’s comprehensive financial plan.

Where is accumulated depreciation shown on a balance sheet?

Accumulated depreciation is typically shown in the Fixed Assets or Property, Plant & Equipment section of the balance sheet, as it is a contra-asset account of the company’s fixed assets. Showing contra accounts such as accumulated depreciation on the balance sheets gives the users of financial statements more information about the company.