Which best describes how accumulated depreciation is shown on the balance sheet?

Which best describes how accumulated depreciation is shown on the balance sheet?

• A. It is shown as a deduction from the asset's cost
• B. It is shown as a separate asset at net value
• C. It is shown as a liability
• D. It is reported as revenue

Answer: (B)

Depreciation lowers the reported value of long-lived assets over time, and accumulated depreciation acts as a contra-asset that offsets the asset’s original cost. On the balance sheet, you present the asset at its net value after subtracting accumulated depreciation, which is often shown as a separate line item under assets (for example, Net property, plant, and equipment). This reflects that the asset’s book value is the result of subtracting the depreciation already recorded from its cost. For instance, if equipment cost 50,000 and accumulated depreciation is 15,000, the net equipment value shown would be 35,000. This concept isn’t about liabilities or revenue, so those options don’t fit.

Depreciation lowers the reported value of long-lived assets over time, and accumulated depreciation acts as a contra-asset that offsets the asset’s original cost. On the balance sheet, you present the asset at its net value after subtracting accumulated depreciation, which is often shown as a separate line item under assets (for example, Net property, plant, and equipment). This reflects that the asset’s book value is the result of subtracting the depreciation already recorded from its cost. For instance, if equipment cost 50,000 and accumulated depreciation is 15,000, the net equipment value shown would be 35,000. This concept isn’t about liabilities or revenue, so those options don’t fit.