Accumulated depreciation is an accounting measure that represents the total depreciation expense recognized for an asset since its acquisition. Depreciation is the process of allocating the cost of a long-term or capital asset over its useful life. Accumulated depreciation is a contra-asset account, meaning it is subtracted from the asset’s original cost to arrive at its carrying value or book value on the balance sheet.

Here’s how accumulated depreciation is calculated and represented in financial statements:

1. **Depreciation Expense:**
– Each accounting period, a portion of the asset’s cost is recognized as depreciation expense. The specific method of depreciation (e.g., straight-line, double declining balance) determines the amount of depreciation recognized each period.

2. **Accumulated Depreciation:**
– The total depreciation recognized over the asset’s life is accumulated in the accumulated depreciation account. This account has a credit balance and is reported on the balance sheet as a reduction from the original cost of the related asset.

The formula for calculating the book value of an asset is:

\[ \text{Book Value} = \text{Original Cost} – \text{Accumulated Depreciation} \]

For example, if a company purchased equipment for $10,000 and has recognized $2,000 in depreciation, the accumulated depreciation account would show a credit balance of $2,000, and the book value of the equipment on the balance sheet would be $8,000.

Accumulated depreciation provides users of financial statements with information about the extent to which an asset’s value has been used up or allocated to expense. It also helps in determining the potential resale value of the asset. Keep in mind that while accumulated depreciation is a measure of the total depreciation recognized, it does not represent a cash fund or a separate pool of assets. It is an accounting concept used for financial reporting purposes.