In terms of accounting, what does accumulated depreciation represent?

Accumulated depreciation represents the total amount of depreciation expense that has been allocated for a tangible fixed asset since it was acquired. Over time, as an asset is used in operations, its value decreases due to wear and tear, obsolescence, and age. This decrease in value is systematically recorded in the accounting records through depreciation expense, which is recognized periodically over the asset's useful life.

The concept of accumulated depreciation allows for a more accurate representation of an asset's carrying value on the balance sheet, as it reflects the ongoing reduction in the asset's value. When you look at the financial statements, the accumulated depreciation is subtracted from the original cost of the asset to show its book value, making it clear how much of the asset's value has been consumed. This is why accumulated depreciation is fundamentally linked to the reduction in the asset's value over time.