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Q: Accountancy ( Answered,   1 Comment )
Question  
Subject: Accountancy
Category: Business and Money > Accounting
Asked by: woolawayridge-ga
List Price: $2.00
Posted: 19 Aug 2003 20:54 PDT
Expires: 18 Sep 2003 20:54 PDT
Question ID: 246707
Diffence between Accumulated Depreciation and Depreciation
Answer  
Subject: Re: Accountancy
Answered By: robertskelton-ga on 19 Aug 2003 21:18 PDT
 
Hi there,

The difference is in the time period. Depreciation in the context of a
financial statement applies to the period covered by the statement.
Accumulated depreciation is the total amount of depreciation that has
been applied to the asset since it was first acquired.


Depreciation
------------
The allocation of the cost of an asset over a period of time for
accounting and tax purposes.
http://www.investorwords.com/cgi-bin/getword.cgi?1416


Accumulated depreciation
------------------------
The depreciation that has taken place on a particular asset up to the
present time.
http://www.investorwords.com/cgi-bin/getword.cgi?5862


Search terms: "Accumulated Depreciation" aggregate expense


Best wishes,
robertskelton-ga
Comments  
Subject: Re: Accountancy
From: respree-ga on 20 Aug 2003 08:44 PDT
 
Accumulated Depreciation is a contra account to the cost of a fixed
asset.  It records the total "Depreciation Expense" recorded against
the asset since the acquisition of the asset.  For example:  If in
year 1, your depreciation expense is $100 and in year 2, your
depreciation expense is $100, that would mean your 'accumulated
depreciation' is $200.  This balance sheet account it is not time
period sensitive.  It is also used when calculating the Net Book Value
of a fixed asset.  Let's say in the example above, the asset you
purchased 2 years ago cost $1000.  If your accumulated depreciation at
the end of year 2 was $200, that would mean the Net Book Value of that
asset is $800 ($1000 [original cost] minus $200 [accumulated
depreciation]).  Once the accumulated depreciation reaches the amount
of the cost (in this example, $1000), the asset is considered
worthless (for accounting purposes) and is termed "fully depreciated."
 Assets are sometimes sold, abandoned or disposed of.  When this
happens, both the cost of the assets and its related accumulated
depreciation are removed from the books (balance sheet).

Depreciation (or more commonly called "Depreciation Expense") is the
systematic write off of an asset based on its useful life.  Fixed
assets generally fall into several categories, each of which have
their own 'useful life.' Examples of these classifications include,
but are not limited to, buildings, leasehold improvements, computer
equipment, office equipment, vehicles, etc.  Depreciation expense is
an 'income statement' account versus 'accumulated depreciation,' which
is a balance sheet account.  This account is time sensitive. 
Depreciation expense is usually recorded once per month.  At the end
of the fiscal year, the depreciation expense account is zeroed.

Depreciation expense and Accumulated Depreciation go hand in hand. 
With the exception of when an asset is disposed of, you cannot record
one without the other.

In the example above, to record a $100 depreciation expense, the
accounting entry would be:

Debit: Depreciation Expense $100 (income statement account)
Credit: Accumulated Depreciation $100 (balance sheet account)

Probably more than you wanted to know, but I hope this information
helps.

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