Question

Depreciation represents the loss in a fixed asset's value due to aging. __________ appears on the income statement and represents the reduction in fixed assets' values over the previous accounting period.________ appears on the balance sheet and represents the cumulative value reduction in the firm's present fixed asset holdings since their acquisition.

Answer 1

Answer:

The correct words for the blank spaces are: Depreciation expense; Accumulated depreciation.

Explanation:

Depreciation expense and Accumulated expense are typically confused but they are different since the first is reported in the Income Statement while the latter appears on the Balance Sheet as the contra asset. Depreciation expense represents the part of the company's fixed assets that are being used up for production and is compared with the previous period depreciation expense.

Accumulated depreciation is the aggregate depreciation of an asset from all prior periods. Accumulated depreciation is subtracted from the assets' historical cost value which records the value of the assets since they were purchased.