What is collected Depreciation?

Accumulated depreciation is the complete depreciation because that a addressed asset that has actually been fee to expense since that asset to be acquired and made available for use. The gathered depreciation account is an asset account with a credit balance (also recognized as a contra heritage account).

You are watching: The total cost of an asset less its accumulated depreciation is called:

The lot of accumulated depreciation for an legacy will increase over time, together depreciation continues to be charged versus the asset. The original price of the legacy is known as its gun cost, while the original cost of the asset much less the quantity of accumulated depreciation and any special needs is well-known as its net cost or transferring amount.

When the heritage is eventually retired or sold, the quantity in the accumulated depreciation account relating to the asset is reversed, as is the original cost of the asset, in order to eliminating all document of the asset indigenous the company"s balance sheet. If this derecognition were no completed, a firm would gradually build up a huge amount that gross resolved asset expense and gathered depreciation on its balance sheet.

Impact of accelerated Depreciation on collected Depreciation

The balance in the built up depreciation account will certainly increase more quickly if a business uses an increased depreciation methodology, because doing for this reason charges an ext of an asset"s expense to cost during its previously years the usage.

Presentation of accumulated Depreciation

Accumulated depreciation appears on the balance sheet together a reduction from the pistol amount of solved assets reported. It is generally reported as a solitary line item, however a more detailed balance sheet might list several collected depreciation accounts, one because that each resolved asset type.

See more: Successive Lines And Spaces From Top To Bottom Of The Staff Represent Successively Lower Pitches.

How come Calculate built up Depreciation

Calculating gathered depreciation is a an easy matter of to run the depreciation calculation for a addressed asset indigenous its acquisition day to the disposition date. However, the is helpful to spot-check the calculation of the depreciation amounts that were recorded in the general ledger over the life the the asset, come ensure the the exact same calculations were provided to record the basic depreciation transaction.

Example of gathered Depreciation

ABC international buys a maker for $100,000, i m sorry it records in the Machinery addressed asset account. ABC approximates that the device has a valuable life the 10 years and also will have actually no rescue value, so that charges $10,000 come depreciation price per year because that 10 years. The annual entry, showing the credit transaction to the gathered depreciation account, is: