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What is accumulated depreciation?

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation expense since the asset was put into service. Accumulated depreciation is associated with constructed assets such as buildings, machinery, office equipment, furniture, fixtures, vehicles, etc.

Accumulated Depreciation is also the title of the contra asset account which is credited when Depreciation Expense is recorded each accounting period.

The amount of accumulated depreciation is used to determine a plant asset's book value (or carrying value). For example, a delivery truck having a cost of $50,000 and accumulated depreciation of $31,000 will have a book value of $19,000. (It is important to note that an asset's book value does not indicate the asset's market value since depreciation is merely an allocation technique.)

The accumulated depreciation of each plant asset cannot exceed the asset's cost. If an asset remains in use after its cost has been fully depreciated, the asset's cost and its accumulated depreciation will remain in the general ledger accounts and the depreciation expense stops. When the asset is disposed (sold, retired, etc.) the asset's cost and accumulated depreciation are removed from the accounts.