Dictionary / Accrued Depreciation
What does Accrued Depreciation mean in accounting?
Quick definition
Accrual & timingThe total depreciation suffered by an asset or asset group, based on customary or fairly determined rates or estimates of useful life, generally referred to as accumulated depreciation. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
The cooler's total wear, not June's slice
You run a nursery and, on May 2, 2024, bought a 12-foot walk-in cooler from a refrigeration supplier for $14,400 with a six-year useful life. At the June 30, 2026 close the fixed-asset schedule shows $5,200 of accrued depreciation: 26 months at $200 a month, the total depreciation suffered so far, also called accumulated depreciation. The balance sheet lists $14,400 cost minus that $5,200 contra; June's depreciation expense on the P&L is only $200. Confirm the schedule total matches the contra; do not overwrite $5,200 with this month's slice.
The bank asked for the running total
You run a metal shop. On September 12, the bank asks for accrued depreciation on the shop equipment, and you forward the September P&L, which shows $380 of depreciation expense. That is this month's wear, not the total. Open the balance sheet or the fixed-asset schedule: the welder and the horizontal bandsaw sit at $36,000 cost with $14,820 of accrued depreciation, the same figure as accumulated depreciation. Send that running total; if you treat $380 as the accrued figure, the bank reads the equipment as nearly new.
Why it matters
Accrued depreciation is the running total of wear already recorded on equipment, vehicles, or furniture, using the useful life or rates you set. It is the same figure as accumulated depreciation. You read it every month-end if you keep a fixed-asset schedule: it sits on the balance sheet as a contra against cost and grows by this period's slice until the asset is fully depreciated or gone. Treat that running total as this month's depreciation expense and profit looks wrecked; ignore the contra and the balance sheet still shows assets at what you paid.
Keep learning
Start with the bookkeeping basics, then compare software when you are ready to pick a tool.
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What is Accrued Depreciation in bookkeeping?
The total depreciation suffered by an asset or asset group, based on customary or fairly determined rates or estimates of useful life, generally referred to as accumulated depreciation.
When should I use Accrued Depreciation?
Use Accrued Depreciation when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Accrued Depreciation?
Accrued Depreciation is used for accrued depreciation entries, while Abandonment covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.