Question

What kind of account is Accumulated Depreciation? What is the normal balance to the account? Why is this account used when we depreciate fixed assets like Building, Equipment, etc?

Answer 1

Accumulated depreciation is the total depreciation for a fixed asset that has been charged to expense since that asset was purchased and made available for use.

The accumulated depreciation account is an ASSETS ACCOUNT with a credit balance . this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets.

Simply assets have a normal balance of a debit But because accumulated depreciation represents how much the asset being depreciated has lost in value, it operates contrary , meaning the opposite as the asset. So it’s considered a contra asset account. And that means its normal balance would be a credit.

Accoumilated depreciation Account is created to make reserve...after the completion of use ful life of particular assets. We require onther assets so at time we can utilise that reserve to acquire new assets so.