How are accumulated depreciation and depreciation expenses similar?

Answer 1

Accumulated depreciation is all of the depreciation ever 'accumulated' against the assets currently in service. It is shown on the balance sheet as a 'contra' (negative) asset, directly below the assets it relates to.

Depreciation expense is the current period's depreciation of the assets currently in service. It is shown on the income (P&L) statement as an expense.

Example:

Business purchased a truck for $20,000 which will last 5 years. For simplicity, we'll use 'straight-line' depreciation.

End of Year One:

Depreciation expense on Income Statement

$4,000 (1/5th of $20,000)

Accumulated Depreciation on balance sheet: $4,000

End of Year Two:

Depreciation expense on Income Statement

$4,000

Accumulated Depreciation on balance sheet: $8,000 (both years)

End of Year Three:

Depreciation expense on Income Statement

$4,000

Accumulated Depreciation on balance sheet: $12,000 (all three years)

Answer 2

When a fixed asset is purchased it is not expensed all at once. It is capitalized (recorded as an asset on the balance sheet) and expensed (on the income statement) over it's lifetime. The portion of fixed asset cost that is expensed each year is depreciation expense. Accumulated depreciation is the cumulative total of depreciation expense taken each year from the beginning of time against assets that are still owned. The accumulated depreciation account is a balance sheet account that offsets the fixed asset balance sheet account. The net amount of these two accounts is the book value of fixed assets.

Answer 3

Depreciation is a charge to the Profit and Loss account or Income statement that shows the charge to a fixed asset (or group of fixed assets) in that period. Accumulated Depreciation is the total depreciation charged to that fixed asset since it was purchased and is shown in the balance sheet reducing the value at purchase to the value at which it is currently held (its Net Book Value).

Answer 4

Accumulated depreciation shows the depreciation for specific asset which is already charged while provision of depreciation is created to charge depreciation before actual depreciation is occur.

Answer 5

Depreciation is the one fiscal year expense portion while accumulated depreciation is the sum of all depreciations from purchase of assets to till date.