what is the purpose of the accumulated depreciation account

The accumulated depreciation account plays a crucial role in accounting by tracking the reduction in value of a company's fixed assets over time. Its primary purpose is to reflect the total depreciation expense for an asset since it was purchased, helping to accurately report the asset’s book value on financial statements. By separating the depreciation from the asset's original cost, businesses can assess the true value of their assets and better manage their financial reporting. The accumulated depreciation account also aids in tax calculations, ensuring compliance with tax regulations. Learn how this accounting tool helps businesses maintain accurate records, plan for asset replacement, and ensure long-term financial health.