Is Accumulated Depreciation a Current Asset?
Accumulated depreciation is not a current asset account.
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?
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:
- Cost of asset
- Minus accumulated depreciation
- Equals the book value of that asset.
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.