Accumulated depreciation is the total depreciation charged against an asset since it was acquired, a contra-asset account that reduces the asset's book value on the balance sheet.
Each period's depreciation expense builds up in accumulated depreciation, a contra-asset account that offsets the asset's original cost. The asset's cost minus accumulated depreciation equals its net book value, what it is carried at on the balance sheet.
Accumulated depreciation is an accounting figure and differs from the tax side, where capital cost allowance and undepreciated capital cost play the equivalent roles. When an asset is sold, both its cost and its accumulated depreciation are removed from the books, and any difference from the sale price is a gain or loss.
A $30,000 machine depreciated $3,000 a year for four years has $12,000 of accumulated depreciation. Its net book value is $30,000 − $12,000 = $18,000 on the balance sheet.
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