Financial Glossary
Accumulated Depreciation
Accumulated depreciation is the running total of all depreciation expense charged against a fixed asset since it was put into service. It appears on the balance sheet as a contra-asset account that reduces the asset's original cost to arrive at its net book value. Each period's depreciation expense flows into this account, which grows over the asset's useful life.
Problem & Application
For real estate and hospitality operators, accumulated depreciation explains why a property carried at a low net book value can still hold substantial market value, and it sets up the depreciation recapture that may apply when the asset is sold. Tracking it accurately on each building, cabin, or piece of equipment keeps the balance sheet honest and supports both lending conversations and tax reporting. A neglected accumulated depreciation account is a common reason books fail to tie out during an audit or sale.
In Short
Accumulated depreciation bridges what an asset cost and what it is currently worth on the books. Keeping it current is essential for an accurate balance sheet and a clean sale or audit.