What does accumulated depreciation indicate?

Accumulated depreciation represents the total amount of depreciation expense that has been recorded against a non-current asset since its acquisition. It indicates how much of the asset’s value has been consumed over its lifespan due to factors such as wear and tear, obsolescence, or usage. By tracking accumulated depreciation, businesses can gain insights into the extent to which an asset has been used and how much of its economic value remains. This measure is crucial for understanding the aging and declining value of assets on the balance sheet, helping organizations plan for future asset replacements or upgrades. It reflects the systematic allocation of the asset's cost over its useful life, effectively matching the asset's usage with the revenue it generates during that time.