What is the Difference Between Depreciation and Accumulated Depreciation?
🆚 Go to Comparative Table 🆚The main difference between depreciation and accumulated depreciation lies in their representation and purpose in accounting. Here are the key differences:
- Depreciation Expense:
- Represents the cost of an asset that has been depreciated for a single period.
- Shows how much of the asset's value has been used up in that year.
- Appears on the income statement as a non-cash expense that reduces the net income.
- Has a debit balance.
- Accumulated Depreciation:
- Represents the total amount of depreciation expense that has been allocated for an asset since the asset was put into use.
- Acts as a contra asset account on the balance sheet, reducing the gross amount of fixed assets reported.
- Has a credit balance.
In summary, depreciation expense is the amount of an asset's cost allocated to a single period, while accumulated depreciation is the total amount of cost allocated to an asset up until a certain point in time. Depreciation expense is recorded on the income statement, while accumulated depreciation appears on the balance sheet as a contra asset.
Comparative Table: Depreciation vs Accumulated Depreciation
Here is a table comparing the differences between depreciation and accumulated depreciation:
| Aspect | Depreciation Expense | Accumulated Depreciation |
|---|---|---|
| Description | The amount of an asset's cost allocated for a single period (e.g., quarter or year). | The total amount of depreciation expense allocated for an asset up to a specific point in time. |
| Financial Statement | Reported on the income statement as a normal business expense. | Reported on the balance sheet as a contra asset, reducing the gross amount of the fixed asset. |
| Formula | Calculated by taking the initial cost of an item, minus the amount it is projected to be worth once it has been used up, and then dividing the result by the expected useful life of the asset. | Calculated by summing up the depreciation expense amounts for each year. |
| Nature | Not an asset, not a liability. | Contra asset account, has a credit balance. |
| Accounting Impact | Allocated and reported at the end of a single accounting period. | Represented as a cumulative amount across multiple accounting periods. |
In summary, depreciation expense is the amount of an asset's cost allocated for a single period, while accumulated depreciation is the total amount of depreciation expense allocated for an asset up to a specific point in time. Depreciation expense is reported on the income statement, whereas accumulated depreciation is reported on the balance sheet as a contra asset, reducing the gross amount of the fixed asset.
- Accounting Depreciation vs Tax Depreciation
- Devaluation vs Depreciation
- Depreciation vs Depletion
- Depreciation vs Amortization
- Depreciation vs Provision for Depreciation
- Accrued Expense vs Accounts Payable
- Amortization vs Impairment
- Defined Benefit vs Accumulation Fund
- Accrual vs Deferral
- SLM vs WDV Method of Depreciation
- Cash Accounting vs Accrual Accounting
- Cash vs Accrual (Accounting)
- Accruals vs Prepayments
- Revaluation vs Impairment
- Debit Balance vs Credit Balance
- Expense vs Expenditure
- Inventory vs Assets
- Capital Expenditure vs Revenue Expenditure
- Accruals vs Provisions