Accumulated Depreciation
Definition
The total depreciation charged against a fixed asset since it was acquired. It is a contra-asset account; the asset's cost less accumulated depreciation gives its net book value.
Formula
Net book value = Asset cost − Accumulated depreciation
Related Terms in Core Accounting
Book Value
The value of an asset or a business as recorded in the accounts — for an asset, cost less accumulated depreciation; for a company, total assets less total liabilities. It can differ significantly from market value.
Salvage Value
The estimated amount an asset is expected to be worth at the end of its useful life. Depreciation is calculated on the cost minus salvage value, so it is spread only over the portion of cost the business expects to consume.
Straight-Line Depreciation
A depreciation method that charges an equal amount each period over an asset's useful life. It is the simplest method and suits assets that lose value evenly over time.
Declining Balance Depreciation
An accelerated depreciation method that applies a fixed percentage to the asset's reducing book value each period, charging more in the early years. It suits assets that lose value faster when newer.
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