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What is Accumulated Depreciation: Meaning, Examples and Benefits

How Accumulated Depreciation Works?

The procedure for calculating accumulated depreciation is given below:

Cost of Machinery (A)

Residual Value of the Machinery (B)

Applicable Depreciation Value (A-B)

₹ 10,00,000

₹ 1,00,000

₹ 9,00,000

So, the depreciation value per year was ₹ 9,00,000/15 = ₹ 60,000.

Now, we can calculate the accumulated depreciation by using this formula:

Accumulated Depreciation = Depreciation Value Per Year X Number of Years

So, the accumulated depreciation of the asset from 1st January 2019 to 31st December 2021 will be:

Accumulated Depreciation = 60,000 X 3 = ₹ 1,80,000

What is the Importance of Accumulated Depreciation?

Frequently Asked Questions