PP&E, Net of Depreciation
PP&E is reported net of accumulated depreciation on the balance sheet, such that:
Net PP&E = Gross PP&E – Accumulated Depreciation
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Accumulated Depreciation (B/S) = (Depreciation Expense)Year 1 + (Depreciation Expense)Year 2 + (Depreciation Expense)Year 3 + ... + (Depreciation Expense)Current Year |
Accumulated depreciation = sum of all depreciation expenses (net of asset sales) on the income statement. It is a contra account, which is an offsetting account to an asset (and can also be to liabilities and shareholders’ equity). Increases in a contra account reduce the associated asset account.
Accumulated depreciation offsets Gross PP&E account, and the two accounts are aggregated together on the balance sheet as Net PP&E:
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