Depreciation & accumulated depreciation

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Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2013 Dear sir,i need clarification regarding depreciation and accumulated depreciation.accumulated depreciation is a contra asset.but i dont understand contra asset.pls tell me about depreciation and accumulated depreciation with examples include journal entries.regards,vijay.

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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12 May 2013 Entry without Acc. Dep.

Dr. Depreciation
Cr. Asset (Asset Group)

Entry with Acc. Dep.

Dr. Depreciation
Cr. Acc. Dep. (Liability Group)

You can see that asset is not reduced rather a liability is raised on opposite side. That's why some people call it as contra asset.

Accumulated Dep. is shown as reduction to Historical cost of asset in Balance Sheet thereby resulting same net effect.