Which of the following is contra-asset account?Multiple choice question.Deferred RevenueDepreciation ExpenseAllowance for Doubtful AccountsCommon Stock
Question
Which of the following is contra-asset account?Multiple choice question.Deferred RevenueDepreciation ExpenseAllowance for Doubtful AccountsCommon Stock
Solution
The correct answer is "Allowance for Doubtful Accounts". This is a contra-asset account because it is directly related to an asset account (Accounts Receivable) and has a credit balance, which is the opposite of the normal debit balance for asset accounts. This account is used to reduce the value of Accounts Receivable to reflect only the amount that is expected to be collected.
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