Accumulated Depreciation Calculator
What Is Accumulated Depreciation?
Accumulated depreciation is the total amount of depreciation expense that has been allocated to a fixed asset since it was placed into service. It is a contra asset account, meaning it has a credit balance and is paired with an asset account to reduce its overall book value on the balance sheet.
Depreciation Methods Explained
- Straight-Line Method: This is the simplest and most common method. It spreads the cost of the asset evenly over its useful life. The formula for the annual depreciation expense is: `(Asset Cost - Salvage Value) / Useful Life`[attached_file:1].
- Declining Balance Method: An accelerated method that records larger depreciation expenses during the earlier years of an asset's life and smaller expenses in later years. The double-declining balance method uses double the straight-line rate.
- Sum-of-the-Years'-Digits (SYD) Method: Another accelerated method. It uses a fraction where the numerator is the remaining useful life of the asset, and the denominator is the sum of all the digits of the asset's useful life.
- Units of Production Method: This method ties depreciation directly to usage. The depreciation expense varies each year based on the number of units the asset produces. The formula per unit is: `(Asset Cost - Salvage Value) / Total Lifetime Units`[attached_file:1].
Frequently Asked Questions (FAQ)
What is the book value of an asset?
The book value is the original cost of an asset minus its accumulated depreciation[attached_file:1]. It represents the net value of the asset on the company's balance sheet.
Do you depreciate land?
No. Land is considered to have an indefinite useful life, so it is not depreciated[attached_file:1]. Buildings on the land, however, are depreciated.