What is the normal balance of accumulated depreciation?

• A. Debit balance
• B. Zero balance
• C. Debit and credit
• D. Credit balance

Answer: (D)

The key idea is that accumulated depreciation is a contra-asset account. It sits alongside assets on the balance sheet but is used to reduce the asset’s overall value. Because it reduces the asset, increases in this account come from credits, not debits. So its normal balance is on the credit side.

In practice, depreciation is recorded by debiting Depreciation Expense and crediting Accumulated Depreciation. Each period’s depreciation adds to the accumulated depreciation balance, which means the account carries a credit balance over time. On the balance sheet, you show the asset at its cost minus the accumulated depreciation, giving the net book value.

For example, a machine costing 50,000 with 12,000 of accumulated depreciation would have a net book value of 38,000. If depreciation for the next year is 2,000, accumulated depreciation increases to 14,000, further reducing net book value. Since accumulated depreciation increases with credits, the normal balance is a credit.