In order to include/understand what is cumulated depreciation and how he is explained it is essential to remember that this concept is closely dependant with the concept of the long-term capital. This article is aimed to lay down perspicacities in the definition of the long-term capital and the related accumulated definition of depreciation.

Concept

Thus capital - properties had by the businesses are divided into two principal groups:

Current assets - soups in the operations of the businesses for period the one year or more courts. This capital is not depreciated
Long-term capital - used in the operations of the businesses for the period longer than a year. The cost of this capital is not included in the expenditure when this capital is acquired, but is rather gradually allotted to the expenditure by the service life of the capital. Such an attribution is called the depreciation.

Come to the accumulated concept of depreciation, this article represents the accumulated cost of the long-term capital, which was already included in the expenditure and is explained in the contrary account with the long-term capital. This means that capital is explained in the accounts of category of capital on the side of flow. When the share of the cost of the particular capital is included in the expenditure, instead of a direct reduction in value on the active account, such a reduction inside credited with the account accumulated with depreciation.

Example

The practical example will help to include/understand this concept. Let us assume the equipment with the cost of $10.000 was acquired on January 1st, 2009. It with 5 years the service life and the method of damping in straight line is applied. Equal of residual value to $0. Other writings for acquisition and the depreciation are explained.

1. When the capital is acquired the following entry is made:

D_________Asset___________C

10,000_________________

2. When the depreciation during the year 2009 is calculated, C. - with-D. $10,000/5=$2,000, the following entry is made:

D_______Depreciation Expenses___C

2,000______________________

D_______Accumulated Depreciation___C

____________________________2,000

Thus the equipment with depreciation is explained in an accumulated account separated from depreciation, which is contrary, C. - with-D. has a balance to compare with the debit balance on the active account. On the assessment the difference between the debit balance of capital and the accumulated balance in depreciation is considered and such a difference represents the clear accounting value of fixed assets of the capital. In the example above at the end He assessment of the year 2009 will show with $10,000-$2,000=$8,000 the clear accounting value of fixed assets of the equipment.
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