what is accumulated depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded against a fixed asset since it was acquired. It represents the reduction in the asset's value over time due to wear and tear, aging, or obsolescence. Accumulated depreciation is recorded on the balance sheet as a contra asset account, which reduces the book value of the asset. This process allows businesses to spread the cost of an asset over its useful life, aligning with accounting principles and providing a more accurate financial picture for tax and reporting purposes.