Question: How is accumulated depreciation reflected in the trial balance?
Options:
As an asset
As a liability
As a contra asset
As an expense
Correct Answer: As a contra asset
Solution:
Accumulated depreciation is recorded as a contra asset, reducing the total value of fixed assets on the balance sheet.
How is accumulated depreciation reflected in the trial balance?
Practice Questions
Q1
How is accumulated depreciation reflected in the trial balance?
As an asset
As a liability
As a contra asset
As an expense
Questions & Step-by-Step Solutions
How is accumulated depreciation reflected in the trial balance?
Step 1: Understand what accumulated depreciation is. It is the total amount of depreciation expense that has been recorded against a fixed asset over time.
Step 2: Know that accumulated depreciation is not an asset itself, but it reduces the value of the asset it is associated with.
Step 3: In accounting, accumulated depreciation is classified as a 'contra asset' account. This means it is listed alongside asset accounts but has a negative balance.
Step 4: When preparing a trial balance, accumulated depreciation is shown under the asset section but is subtracted from the total value of fixed assets.
Step 5: The net value of fixed assets is calculated by taking the total fixed assets and subtracting the accumulated depreciation.
Accumulated Depreciation – Accumulated depreciation is the total amount of depreciation expense that has been allocated to an asset since it was acquired, and it is recorded as a contra asset on the balance sheet.
Contra Asset – A contra asset account is used to reduce the value of a related asset account, in this case, reducing the total value of fixed assets.
Trial Balance – The trial balance is a financial statement that lists all the balances of the general ledger accounts, including assets, liabilities, and equity.
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