what is the purpose of the accumulated depreciation account

The accumulated depreciation account serves a key role in accounting by tracking the reduction in value of a company’s fixed assets over time. It is a contra asset account, meaning it offsets the value of related assets on the balance sheet, ensuring accurate financial reporting. The purpose of this account is to reflect the wear and tear, obsolescence, or usage of long-term assets like buildings, machinery, or equipment. By recording depreciation over time, businesses can manage their asset values, allocate appropriate expenses, and comply with tax and accounting standards, ensuring an accurate picture of financial health.