Accumulated depreciation
In one sentenceThe total depreciation recorded on an asset from its purchase up to the statement date; it is deducted from its cost to show its book value.
Simply put
The asset's cost itself is not reduced each year; instead, depreciation is recorded in a separate account called accumulated depreciation with a credit balance. This keeps the original cost visible, with the part used up shown next to it.
Cost less accumulated depreciation equals book value, which is what you compare the selling price with when disposing of the asset.
Worked example
A car workshop bought equipment for 80,000 SAR with annual depreciation of 16,000 SAR, and 3 years have passed.
Accumulated depreciation: 16,000 × 348,000 SAR
Cost80,000 SAR
Book value: 80,000 − 48,00032,000 SAR
Formula: Book value = Cost − Accumulated depreciation
Don't confuse it with
DepreciationDepreciation is one year's expense in the income statement, while accumulated depreciation is a running balance in the statement of financial position.
in FullScreen ERP
The periodic depreciation entry in the system is posted to the general accounts with no manual entry. Fixed assets