Multiple Choice
Which of the following is considered a personal financial decision?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is a contra-asset account?
A
Prepaid Expenses
B
Accumulated Depreciation
C
Accounts Receivable
D
Notes Payable
Verified step by step guidance1
Understand the concept of a contra-asset account: A contra-asset account is an account that reduces the value of an asset on the balance sheet. It is used to reflect accumulated reductions or adjustments to the asset's value, such as depreciation or allowances.
Review the options provided: Prepaid Expenses, Accumulated Depreciation, Accounts Receivable, and Notes Payable.
Analyze each option: Prepaid Expenses is an asset account, not a contra-asset. Accounts Receivable is also an asset account, not a contra-asset. Notes Payable is a liability account, not related to assets.
Focus on Accumulated Depreciation: Accumulated Depreciation is a contra-asset account because it reduces the value of the associated asset (e.g., equipment or buildings) on the balance sheet by reflecting the total depreciation expense recorded over time.
Conclude that Accumulated Depreciation is the correct answer, as it meets the definition and purpose of a contra-asset account.
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