Select all that applyWhich of the following are contra-asset accounts? (Check all that apply.)Multiple select question.Common StockAllowance for Doubtful AccountsDeferred RevenueAccumulated Depreciation
Question
Select all that applyWhich of the following are contra-asset accounts? (Check all that apply.)Multiple select question.Common StockAllowance for Doubtful AccountsDeferred RevenueAccumulated Depreciation
Solution
The contra-asset accounts from the options provided are:
- Allowance for Doubtful Accounts
- Accumulated Depreciation
These accounts are used to reduce the balance of the respective assets. For example, Allowance for Doubtful Accounts reduces the total receivables reported on the balance sheet because it's likely that some customers will not pay the company the amount they owe. Similarly, Accumulated Depreciation reduces the total value of a company's fixed assets to account for the wear and tear over time.
Common Stock is an equity account, not a contra-asset account. Deferred Revenue is a liability account, representing revenue that has been collected but not yet earned.
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Which of the following is an example of a contra-asset account?
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