Which financial statement reports the amount of accumulated depreciation
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The depreciation term is found on both the income statement and the balance sheet. On the income statement, it is listed as depreciation expense, and refers to the amount of depreciation that was charged to expense only in that reporting period. On the balance sheet, it is listed as accumulated depreciation, and refers to the cumulative amount of depreciation that has been charged against all fixed assets. Accumulated depreciation is a contra account, and is paired with the fixed assets line item to arrive at a net fixed asset total. The differences are noted below. Show
Depreciation Coverage PeriodDepreciation on the income statement is for one period, while depreciation on the balance sheet is cumulative for all fixed assets still held by an organization. Depreciation AmountThe depreciation expense on the income statement is substantially less than the amount on the balance sheet, since the balance sheet amount may include depreciation for many years. Nature of the Reported DepreciationDepreciation on the income statement is an expense, while it is a contra account on the balance sheet. Example of Depreciation Usage on the Income Statement and Balance SheetA company acquires a machine that costs $60,000, and which has a useful life of five years. This means that it must depreciate the machine at the rate of $1,000 per month. For the December income statement at the end of the second year, the monthly depreciation is $1,000, which appears in the depreciation expense line item. For the December balance sheet, $24,000 of accumulated depreciation is listed, since this is the cumulative amount of depreciation that has been charged against the machine over the past 24 months. Accumulated depreciation accounts are asset accounts with a credit balance (known as a contra asset account). It is considered a contra asset account because it contains a negative balance that intended to offset the asset account with which it is paired, resulting in a net book value. It appears on the balance sheet as a reduction from the gross amount of fixed assets reported. Accumulated depreciation is not an asset because balances stored in the account are not something that will produce economic value to the business over multiple reporting periods. Accumulated depreciation actually represents the amount of economic value that has been consumed in the past. This article will also discuss: Is Accumulated Depreciation a Current Asset or Fixed Asset? What Is Accumulated Depreciation Classified as on the Balance Sheet? Is Accumulated Depreciation a Current or Long-Term Asset? NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area. Is Accumulated Depreciation a Current Asset or Fixed Asset?As we mentioned above, depreciation is not a current asset. It is also not a fixed asset. Depreciation is the method of accounting used to allocate the cost of a fixed asset over its useful life and is used to account for declines in value. It helps companies avoid major losses in the year it purchases the fixed assets by spreading the cost over several years. Current assets are not depreciated because of their short-term life. What Is Accumulated Depreciation Classified as on the Balance Sheet?The total decrease in the value of an asset on the balance sheet over time is accumulated depreciation. The values of all assets of any type are put together on a balance sheet rather than each individual asset being recorded. No accumulated depreciation will be shown on the balance sheet. A machine purchased for $15,000 will show up on the balance sheet as Property, Plant and Equipment for $15,000. Over the years the machine decreases in value by the amount of depreciation expense. In the second year, the machine will show up on the balance sheet as $14,000. The tricky part is that the machine doesn’t really decrease in value – until it’s sold. So, the asset shows up in two different accounts: the asset’s depreciated cost and accumulated depreciation. The total of the two is the original cost of the asset. The difference between the two is the book value of that asset. The assets’ value on the balance sheet is expressed as:
Is Accumulated Depreciation a Current or Long-Term Asset?Accumulated depreciation is an asset account with a credit balance known as a long-term contra asset account that is reported on the balance sheet under the heading Property, Plant and Equipment. The amount of a long-term asset’s cost that has been allocated, since the time that the asset was acquired. In which financial statement is accumulated depreciation reported?Depreciation expense is reported on the income statement as any other normal business expense, while accumulated depreciation is a running total of depreciation expense reported on the balance sheet. Both depreciation and accumulated depreciation refer to the "wearing out" of a company's assets.
Which financial statement reports the amount of accumulated depreciation quizlet?Which financial statement reports the amount of accumulated depreciation? (Accumulated depreciation is a contra asset account that that is reported on the balance sheet.)
How is depreciation expense reported in the financial statements?The depreciation term is found on both the income statement and the balance sheet. On the income statement, it is listed as depreciation expense, and refers to the amount of depreciation that was charged to expense only in that reporting period.
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