More of this Feature • Introduction • Income Statement • Revenue / sales • Cost of Goods Sold • Gross profit • Gross margin • The first three lines • Operating Expenses • R&D Expense • SG&A Expense • Goodwill Charges • Extraordinary Events • Accounting for extraordinary events • Oper. income/margin • Interest income and expense • Interest coverage ratio • Depreciation expense • Accum. Depreciation • Straight-line Method • Accelerated and Sum of the Years' Digits Method • Dbl Declining Balance • Comparing Depr. Mths • EBITDA • Income taxes • Minority Interests - cost, equity, and consolidated methods • Unreported earnings • Continuing operations • Accounting changes • Preferred dividends • Net income applicable to common shares • Net profit margin • Basic vs. Diluted EPS • Hiding share dilution • Share repurchases • Return on Equity- ROE • Asset turnover • Return on Assets- ROA • Projecting earnings • Formulas & Calculations • Putting it together • Segment 2

Related Resources • Investing Lesson 1 • Investing Lesson 2 • Investing Lesson 3 • More Lessons

From Other Guides • Special Depreciation Allowance for your car

Elsewhere on the Web • Accumulated Depreciation • Accumulated Depreciation and Fixed Assets • Accumulated Depreciation Reduces Book Value

Accumulated Depreciation
If you purchased a new car for $50,000 and resold it three years later for $30,000, you would have experienced $20,000 loss on the value of your asset. This $20,000 is due to a force called depreciation. Accumulated depreciation is the reduction of the carrying amount of the assets on the balance sheet to reflect the loss of value due to wear, tear, and usage. Companies purchase assets such as computers, copy machines, buildings, and furniture, all of which lose value each day. This depreciation loss must be accounted for in the company's financial statements in order to give shareholders the most accurate portrayal of the economic realty of the business.

Accumulated Depreciation - Net
When you look at a balance sheet, if you see the entry "Property, Plant, and Equipment - net" it is referring to the fact that the company has deducted accumulated depreciation from the figure presented. To see the amount of those depreciation charges, you will probably have to delve into the annual report or 10k.

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