Which term best describes 'accumulated depreciation'?

Which term best describes 'accumulated depreciation'?

• A. Annual depreciation minus curtailments
• B. Difference between market value and replacement cost
• C. Total depreciation that has accrued over an item's lifespan
• D. Average depreciation of similar items in the market

Answer: (C)

Accumulated depreciation refers to the total amount of depreciation expense that has been recognized for a fixed asset over its useful life. This concept captures the wear and tear, age, and obsolescence of the asset, which affects its book value. By summing up the depreciation taken in each accounting period since the acquisition of the asset, accumulated depreciation provides a clear view of how much value the asset has lost over time. This information is essential for financial reporting, asset valuation, and tax purposes. Thus, the choice that correctly defines accumulated depreciation is the total depreciation that has accrued over an item's lifespan, encapsulating the asset's financial status as it ages and is used in business operations.

Accumulated depreciation refers to the total amount of depreciation expense that has been recognized for a fixed asset over its useful life. This concept captures the wear and tear, age, and obsolescence of the asset, which affects its book value. By summing up the depreciation taken in each accounting period since the acquisition of the asset, accumulated depreciation provides a clear view of how much value the asset has lost over time. This information is essential for financial reporting, asset valuation, and tax purposes. Thus, the choice that correctly defines accumulated depreciation is the total depreciation that has accrued over an item's lifespan, encapsulating the asset's financial status as it ages and is used in business operations.