Definition
Accumulated depreciation is a contra-asset account that reduces the book value of fixed assets. It represents the portion of asset cost already expensed. Subtracting accumulated depreciation from gross fixed assets gives net fixed assets (book value of property, plant, and equipment).
Formula
Net Fixed Assets = Gross Fixed Assets - Accumulated Depreciation
Example
Equipment purchased for $100M with $60M accumulated depreciation has net book value of $40M. The company has used 60% of the asset's depreciable life.
FAQ
What is Accumulated Depreciation?
The total depreciation charged against fixed assets over time.
How do you calculate Accumulated Depreciation?
A common formula for Accumulated Depreciation is: Net Fixed Assets = Gross Fixed Assets - Accumulated Depreciation
Why is Accumulated Depreciation important?
Accumulated Depreciation helps investors evaluate financial statements and make more informed decisions.