Accumulated Depreciation - Buildings
What is Accumulated Depreciation – Buildings?
The accumulated depreciation for a building is the sum total of a building’s depreciation, to date.
![adb 1](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-1.jpg)
How it Works
A company may own a building.
![adb 2](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-2.jpg)
When first built, the building will have a certain value.
![adb 3](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-3.jpg)
Then each year, the building loses value.
![adb 4](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-4.jpg)
This loss of value is known as depreciation.
![adb 5](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-5.jpg)
As time goes by, the building loses more and more value.
![adb 6](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-6.jpg)
The combined loss of value is known as accumulated depreciation.
![adb 7](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-7.jpg)
Recording Depreciation
You need to calculate and track the building’s depreciation, one year to the next.
![adb 8](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-8.jpg)
The matching principle of accounting requires that depreciation be matched to revenue in each period.
![adb 9](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-9.jpg)
So your period-end reports need to show this depreciation.
![adb 10](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-10.jpg)
To record depreciation, you use an accumulated depreciation building account.
![adb 11](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-11.jpg)
An accumulated depreciation building account is a separate account — attached to the asset account.
![adb 12](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-12.jpg)
The account is a valuation account.
![adb 13](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-13.jpg)
It’s balance reduces that of the building account.
![adb 14](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-14.jpg)
At the same time, it keeps a running tally of the building’s accumulated loss of value.
![adb 15](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-15.jpg)
The account is also a contra asset account.
![adb 16](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-16.jpg)
Unlike typical asset accounts, it balances on the credit side.
![adb 17](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-17.jpg)
To record depreciation, you credit the accumulated depreciation building account.
![adb 18](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-18.jpg)
This shows you have taken value from the asset.
![adb 19](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-19.jpg)
After that, you debit the depreciation expense account.
![adb 20](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-20.jpg)
This shows the value was used as an expense.
![adb 21](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-21.jpg)
When complete, the transaction will show that value has come from the asset and has been used as an expense.
![adb 22](https://seeaccountingnow.online/wp-content/uploads/2021/08/adb-22.jpg)