As the balance in the Accumulated Depreciation increases, total assets because Accumulated Depreciation is a -account.
Question
As the balance in the Accumulated Depreciation increases, total assets because Accumulated Depreciation is a -account.
Solution
As the balance in the Accumulated Depreciation increases, total assets decrease because Accumulated Depreciation is a contra-asset account.
Here's the step by step explanation:
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Accumulated Depreciation is a contra-asset account, meaning it is paired with and offsets the asset account it is associated with, in this case, the asset being depreciated.
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When the balance in the Accumulated Depreciation account increases, it means that the value of the asset is decreasing over time due to wear and tear, usage, or obsolescence. This is the process of depreciation.
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This increase in Accumulated Depreciation reduces the book value of the asset on the balance sheet.
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Since assets are a part of the balance sheet equation (Assets = Liabilities + Equity), a decrease in assets (due to an increase in Accumulated Depreciation) will result in a decrease in the total assets.
So, in conclusion, as Accumulated Depreciation increases, total assets decrease.
Similar Questions
Accumulated Depreciation has a normal balance which indicates that it reduces total assets.
The balance in the Accumulated Depreciation account represents the
True or false: Accumulated Depreciation is a contra-account to a long-lived asset account, such as Equipment. This means that it is added to and increases the balance of the long-lived asset in the balance sheet.
Accumulated depreciation is an: A. contra revenue account. B. liability account. C. contra asset account. D. expense account.
Accumulated Depreciation is defined as: Group of answer choices Depreciation p.a. / Number of years used Depreciation p.a. + Number of years used Depreciation p.a. Depreciation p.a. - Number of years used Depreciation p.a. x Number of years used
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