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Accumulated Depreciation is classified as a contra asset. What is its normal balance and on which statement does it appear?
AA debit balance, reported on the statement of profit or loss
BA debit balance, reported on the statement of financial position
CA credit balance, reported on the statement of profit or loss
DA credit balance, reported on the statement of financial position
Answer & Solution
Correct answer: D. A credit balance, reported on the statement of financial position
1. Accumulated Depreciation is a contra asset account.
2. Unlike a normal asset, it carries a credit normal balance, ruling out B and A.
3. It is a balance sheet (statement of financial position) item, not a profit-or-loss item, ruling out C.
4. Therefore D is correct: credit balance, statement of financial position.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.2.3 "Adjusting Entry Accounts", p.56_