How can accumulated depreciation be negative

About Contact Environmental Commitment. Accumulated depreciation is classified separately from normal asset and liability accounts, for the following reasons: 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. Corporation advantages and Treasury stock method. Copyright An asset may also increase in value due to importation and currency exchange rate fluctuations.

For example. The importer would then record the asset value at cost and add negative depreciation to increase its recorded value. Although it increases asset value, negative depreciation appears as a negative value. The value of an asset is usually calculated by deducting accumulated depreciation from the original asset value. Edriaan Koening began writing professionally in , while studying toward her Bachelor of Arts in media and communications at the University of Melbourne.

Leave a Reply Cancel reply Enter your comment here Fill in your details below or click an icon to log in:. Email required Address never made public. Name required. Follow Following. Sign me up. Your Practice. Popular Courses. Key Takeaways Accumulated depreciation is the running total of depreciation that has been expensed against the value of an asset. Fixed assets are recorded as a debit on the balance sheet while accumulated depreciation is recorded as a credit—offsetting the asset. Since accumulated depreciation is a credit, the balance sheet can show the original cost of the asset and the accumulated depreciation so far.

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This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Partner Links. An impairment in accounting is a permanent reduction in the value of an asset to less than its carrying value.

Contra Account Definition A contra account is an account used in a general ledger to reduce the value of a related account. A contra account's natural balance is the opposite of the associated account. Capital Lease Definition A capital lease is a contract entitling a renter the temporary use of an asset and, in accounting terms, has asset ownership characteristics.

Depreciation Definition Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value over time.