Depreciation is used in accounting as a means of allocating the cost of an item, usually a tangible asset, over its life expectancy. In its essence, it represents how much of an asset's value has been used up over a specific period of 𝓰time.

澳洲幸运5官方开奖结果体彩网:Accumulated depreciation takes into consideration the total amount of 澳洲幸运5官方开奖结果体彩网:depreciation of an asset from the point that it started being used. It is what is known as a 澳洲幸运5官方开奖结果体彩网:contra account; in this case, an asset whose natural balance is a credit, as it offsets the negati♔ve value balance (debit) of the asset account it is linked to.

During an asset's 澳洲幸运5官方开奖结果体彩网:useful life, its depreciation is marked as a debit, while the accumulated depreꩵciation is marked as a credit. When the asset is removed from service, the accumulated depreciation is marked as a debit and the value of the asset as a credit. The negative accumulated depreciation offsets the positive value of ꦉthe asset.

Though depreciation is a cost, which affects net income, accumulated depreciation is a bookkeeping method that does not directly affect 澳洲幸运5官方开奖结果体彩网:net income.

Depreciation and Net Income 

Net income is the number left over after all cost of goods sold, operating expenses, selling, general, and administra🅺tive expenses, depreciation, interest, taxes, and any other expenses have been accounted for. It is the net earnings of a company.

A depreciation expense reduces net income when the asset's cost is allocated on the income statement. Depreciation is used to account for declines in the value of a 澳洲幸运5官方开奖结果体彩网:fixed asset over time. In most instances, the fixed asset is usually 澳洲幸运5官方开奖结果体彩网:property, plant, and equipment.

Depreciation allows a company to spread the cost of an asset over its useful life, which avoids having to incur a significant cost from being charged when the asset is initially pu🅘rchased. It is an accounting measure that allows a company to earn revenue from an asset, and pay for it over the time it is used. As a result, the amount of depreciati▨on expensed reduces the net income of a company.

Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded so far for the asset. Each time a company charges depreciation as an expense on its 澳洲幸运5官方开奖结果体彩网:income statement, it increases accumulated depreciati꧟on by the same amount for that period. As a result, a company's accumulated depreciation increases over time, as depಌreciation continues to be charged against the company's assets.

A company can increase the balance of its accumulated depreciation more quickly if it uses an 澳洲幸运5官方开奖结果体彩网:accelerated depreciation over a traditional 澳洲幸运5官方开奖结果体彩网:straight-line method. An accelerated de💧preciation method charges a larger amount of the asset's cost to depreciation expense during the early years of the asset.

Impact From the Sale of an Asset

When a company 澳洲幸运5官方开奖结果体彩网:sells or retires an asset, its total a♐ccumulated depreciation is reduced by the amount related to the sale of the asset. The total amount of accumulated depreciation associated with the sold or retired asset or group of assets will be reversed. This causes the accumulated depreciation to be reduced by the entire amount of the asset when the asset is so🅠ld.

The reversal of accumulated depreciation following a sale of an asset removes it from the company's balance sheet. This process eliminates all records of the asset on the accounting books of the company.

The Bottom Line

澳🅷洲幸运5官方开奖结果体彩网:Accumulated depreciation is a running total of the depreciation expense that has been recorded over the years and is offset against the sale of the asset. It does not impact net income or earnings, which is th𝐆e amount of revenue left after all costs, expenses, depreciation, interest, and taxes have been taken into consideration. As such, the depreciation expense recorded each period reduces net income.