Question

The total assets of a dairy products manufacturing company are calculated. However, a sum of $5 million from the value of the company's property, plant, and equipment assets is not taken into account as the machinery is bound to become unusable after a certain period of time. In the context of balance sheets, the amount of $5 million that is subtracted from the original value of the total assets is called _____.

Answer 1

accumulated depreciation

Step-by-step explanation:

Accumulated depreciation is a cumulative depreciation of the asset of an organization up to a single point in its life. The accumulated depreciation is the contra asset account, which means that the natural balance of the organization's assets is a credit which reduces the overall or total asset value of the organization. It has a credit balance since it cumulates the amount of the depreciation expense which is charged against the fixed asset.

In the context, 5 million dollar is not included in the balance sheet of the total assets of a dairy products manufacturing company is called as the "accumulated depreciation".