Accumulated Depreciation

Definition: Contra-asset; total depreciation to date

Scope:BroadDifficulty:Easy

Contra-asset; total depreciation to date

Common Journal Entries
AccountDebitCredit
1. Record annual depreciation
Equipment: $12,000 per year.
Depreciation ExpenseExpense+$12,000
Accumulated DepreciationContra Asset+$12,000
Contra-asset increases; carrying value decreases.
2. Dispose of fully depreciated asset
Equipment cost $48,000, fully depreciated.
Accumulated DepreciationContra Asset−$48,000
EquipmentAsset−$48,000
Both asset and contra-asset removed. No gain or loss.

T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.

Depreciation ExpenseDepreciation ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$12,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12,000.00
Accumulated DepreciationAccumulated DepreciationLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$48,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12,000.00
Normal bal. ▶
$36,000.00
EquipmentEquipmentAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$48,000.00
$48,000.00
DurationLong-Term

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