Accumulated depreciation is an: A. contra revenue account. B. liability account. C. contra asset account. D. expense account.
Question
Accumulated depreciation is an:
A. contra revenue account.
B. liability account.
C. contra asset account.
D. expense account.
Solution
The answer is C. contra asset account.
Here's the step-by-step explanation:
A. A contra revenue account is an account that is deducted from a revenue account. Accumulated depreciation is not deducted from revenue, so it is not a contra revenue account.
B. A liability account represents an obligation of the business. Accumulated depreciation is not an obligation, so it is not a liability account.
C. A contra asset account is an account that is deducted from an asset account. Accumulated depreciation is deducted from the asset account (specifically, the property, plant, and equipment account), so it is a contra asset account.
D. An expense account represents a cost incurred by the business. While depreciation is a cost, accumulated depreciation is not an expense account. It is a contra asset account that represents the total depreciation of an asset since it was acquired.
Therefore, the correct answer is C. contra asset account.
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