accumulated depreciation example

An example of accumulated depreciation is when a company purchases a piece of equipment for $10,000 with a useful life of 5 years. Each year, the company records $2,000 in depreciation (assuming straight-line depreciation), and after 3 years, the accumulated depreciation will total $6,000. This amount is subtracted from the asset's original value on the balance sheet, reducing its book value to $4,000. Accumulated depreciation reflects the wear and tear or obsolescence of the asset over time.