On the balance sheet, accumulated depreciation serves to show which of the following?

On the balance sheet, accumulated depreciation serves to show which of the following?

• A. It records the original cost of the asset
• B. It shows the portion of the asset cost that has been depreciated to date
• C. It reports current market value
• D. It records cash outflows for maintenance

Answer: (B)

Accumulated depreciation is a contra-asset account that accumulates the total depreciation expense recorded for an asset since it was placed in service. On the balance sheet, it reduces the asset’s gross cost to show net book value, which is the amount the asset is expected to contribute to operations after accounting for wear and tear. That’s why the best description is that it shows the portion of the asset cost that has been depreciated to date. It doesn’t record the original cost by itself (that’s the asset’s gross amount), it doesn’t reflect current market value (that would relate to fair value or market price, not depreciation), and it doesn’t capture cash outflows for maintenance (those are operating cash flows and expenses).

Accumulated depreciation is a contra-asset account that accumulates the total depreciation expense recorded for an asset since it was placed in service. On the balance sheet, it reduces the asset’s gross cost to show net book value, which is the amount the asset is expected to contribute to operations after accounting for wear and tear. That’s why the best description is that it shows the portion of the asset cost that has been depreciated to date. It doesn’t record the original cost by itself (that’s the asset’s gross amount), it doesn’t reflect current market value (that would relate to fair value or market price, not depreciation), and it doesn’t capture cash outflows for maintenance (those are operating cash flows and expenses).