What is accumulated depreciation exactly?
Accumulated depreciation is the total depreciation expense recorded for an asset from the date it entered service through the reporting date. It is a contra-asset balance, so it reduces the asset's historical cost on the balance sheet without changing that original cost.
Net book value equals the asset cost minus accumulated depreciation. Book value is an accounting measure and may differ from resale value, replacement cost, or market value.
- Asset cost is the original capitalized amount.
- Salvage value is the estimated value remaining at the end of useful life.
- Useful life is the period over which the depreciable amount is allocated.
How to calculate accumulated depreciation
The calculator supports straight line, declining balance, sum of the year's digits, and units of production. Each method allocates the depreciable amount differently, so select the method used by the accounting policy before entering its conditional fields.
For the straight-line example of a $25,000 asset, $3,000 salvage value, 15-year life, and three elapsed years, annual depreciation is $1,466.67. Accumulated depreciation is $4,400 and net book value is $20,600.
- Straight line spreads cost minus salvage value evenly over useful life.
- Declining balance applies a fixed rate to the opening book value each year.
- Sum of the year's digits applies larger fractions earlier in the asset's life.
- Units of production allocates depreciation according to actual output.
How to use the accumulated depreciation calculator
Choose the accumulated depreciation method first. The calculator then displays only the inputs required for that method. Units of production adds one actual-output field for each selected year, matching the source calculator's conditional workflow.
Use consistent periods and do not mix financial-reporting useful life with a different tax schedule. The displayed latest-year depreciation helps reconcile the accumulated balance with the current period expense.
- Do not enter salvage value above asset cost.
- For sum of the year's digits, requested year cannot exceed useful life.
- For units of production, total actual units should not exceed estimated lifetime units.
- Use a separate tax schedule when tax rules differ from book depreciation.
Frequently asked questions
Accumulated depreciation normally increases each reporting period until the asset is disposed of or fully depreciated. A repair does not automatically reset depreciation, while a qualifying capital improvement may change the depreciable basis or useful life.
When an asset is sold or retired, both its cost and related accumulated depreciation are removed from the accounts. Any difference between proceeds and carrying amount is generally recognized as a gain or loss, subject to applicable accounting rules.