Balance sheet accumulated depreciation. The accumulated depreciation account is an asset account with a credit balance also known as a contra asset account. The chart of accounts for a business includes balance sheet accounts that track what the company owns its assets. The two types of asset accounts are current assets and long term assets.
The value of the assets must be equal to the claims made against those assets. When using the double declining balance method the salvage value is not considered in determining the annual depreciation but the book value of the asset being depreciated is never brought below its salvage value regardless of the method used. Accumulated depreciation is the cumulative depreciation of an asset up to a single point in its life.
This means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported. As the value of these assets declines over time the depreciated amount is recorded as an expense on the balance sheet. The balance sheet accounts and the financial report they make up are so called because they have to balance out.
A balance sheet reports a companys assets liabilities and shareholders equity at a specific point in time and provides a basis for computing rates of return and evaluating its capital. An assets carrying value on the balance sheet is the difference between its purchase price. Over time the assets a company owns lose value which is known as depreciation.
Introduction to balance sheet. In financial accounting a balance sheet or statement of financial position is a summary of the financial balances of an individual or organization whether it be a sole proprietorship a business partnership a corporation private limited company or other organization such as government or not for profit entity. The accumulated depreciation account is used in accounting so that the recorded cost of the equipment can stay on the books and the contra asset account of accumulated depreciation is used so that the depreciation of the equipment can be kept track of year to year.