Accumulated Depreciation

The amount of Depreciation Expense that has been claimed since the time that the asset was acquired. Accumulated Depreciation is a long–term contra asset account (an asset account with a credit balance) that is reported on the balance sheet under the heading Property, Plant, and Equipment.

For example: If you purchased a building for $100,000 with a useful life of 40 years, the yearly straight–line depreciation expense is $2,500. The accumulated depreciation after four years will be $10,000.

Learn how to analyze a balance sheet in terms of company's liquidity and solvency using financial ratios such as the current ratio, quick (or acid) ratio, debt to asset ratio and debt to equity ratio.