Home › ACCA › Financial Accounting › Property, Plant and Equipment › Accumulated Depreciation is best described as wh…
Accumulated Depreciation is best described as which type of account?
AAn expense account on the statement of profit or loss
BA liability account on the statement of financial position
CA revenue account on the statement of profit or loss
DA contra asset account on the statement of financial position
Answer & Solution
Correct answer: D. A contra asset account on the statement of financial position
1. Accumulated Depreciation accumulates the depreciation charged on an asset over time.
2. It carries a credit balance and is deducted from the asset's cost to show carrying amount.
3. An account that offsets an asset is a contra asset account, reported in the assets section.
4. It is not closed at period end, unlike Depreciation Expense (an expense).
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.5.1 "Depreciation Terms", p.150_