Depreciation expense is the periodic depreciation charge that a business takes against its assets in each reporting period. Accumulated depreciation is the cumulative amount of this depreciation that has piled up since the initiation of depreciation for each asset. The following differences apply to the two concepts:
- Depreciation expense appears on the income statement, while accumulated depreciation appears on the balance sheet.
- The balance in the depreciation expense account is a debit, while the balance in the accumulated depreciation account is a credit.
- Depreciation expense is a separate and independent line within the income statement, while accumulated depreciation is paired with and offsets the fixed assets line item.
- The depreciation expense for an asset is halted when the asset is sold, while accumulated depreciation is reversed when the asset is sold.