Is Accumulated Depreciation an asset or a liability?

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Offline Repon

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Is Accumulated Depreciation an asset or a liability?
« on: April 18, 2017, 11:29:31 PM »
Is accumulated depreciation an asset or a liability?

Accumulated Depreciation is neither an asset nor a liability. Accumulated Depreciation is a contra-asset account. It is treated as a direct deduction from the cost of property, plant and equipment, to arrive at the net book value/carrying value. For presentation purposes, it is already netted against the cost of fixed assets, and the carrying value of fixed assets is presented as a separate line item in the face of the Statement of Financial Position.

It is not an asset, since the balances stored in the account do not represent something that will produce economic value to the entity over multiple reporting periods. If anything, accumulated depreciation represents the amount of economic value that has been consumed in the past.

It is not a liability, since the balances stored in the account do not represent an obligation to pay a third party. Instead, accumulated depreciation is used entirely for internal record keeping purposes, and does not represent a payment obligation in any way.
« Last Edit: April 20, 2017, 01:13:26 PM by Repon »
Senior Lecturer in Accounting
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Offline hassan

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Re: Is accumulated depreciation an asset or a liability?
« Reply #1 on: April 20, 2017, 07:33:14 AM »
Good post
Md. Arif Hassan
Assistant Professor
Department of Business Administration
Faculty of Business and Economics
Daffodil International University

Offline Repon

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Re: Is Accumulated Depreciation an asset or a liability?
« Reply #2 on: April 20, 2017, 01:13:49 PM »
Thank you sir........Md. Arif Hassan
Senior Lecturer in Accounting
Department of Business Administration
Faculty of Business & Economics
Daffodil International University