What Causes Accumulated Depreciation To Increase

The Accumulated Depreciation would increase over time if the Depreciation Expense for the year would increase as there is positive relationship exists between these two accounting term. The more depreciation charged to expense per year, the more accumulated depreciation will be for coming years during the Useful Life of Depreciating Assets.

It may be made when Fixed Assets / Non Current Assets are revalued at the higher value than the previous one and also the same Depreciation Method is adopted by the company.

For Example, if the Furniture purchased for Rs. 50000. It is depreciated by straight line method. The useful life of Furniture is 10 years, After 5 Years, the company changes the accounting policy about furniture and revalue it at fair market value of Rs. 100000. Now, we check whether accumulated depreciation increases or not, we take into consider accumulated depreciation before the revaluation and after revaluation.

Before Revaluation

Accumulated Depreciation = Depreciation Expense per year X Useful Life

  = 5000 X 5 = 25000

Here, Depreciation Expense = Cost / No. of years = 50000 / 10 = Rs. 5000

After Revaluation

                                       Accumulated Depreciation    = 20000 X 5 = Rs. 100000

While

                                       Depreciation Expense = 100000 / 5 = Rs. 20000

Hence, accumulated depreciation will be increased from Rs. 25000 to Rs. 100000 for 5 years.