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➢ What does the balance in the accumulated depreciation account represent? Does this balance represent cash...

➢ What does the balance in the accumulated depreciation account represent? Does this balance represent cash that can be used to replace the related plant asset when it is completely depreciated?

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Answer #1

The balance in the accumulated depreciation account represents the depreciation that has been charged on the asset till date from the date when the asset was put in service. It is also referred to as a contra asset account since it shows a credit balance in the balance sheet and shown as a deduction from gross amount in order to get the net amount of asset.

No this balance does not represent cash that can be used to replace the related plant asset when it is completely depreciated.

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