Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following statements about the accumulated depreciation account is true?

Accumulated depreciation is a contra-asset account that reduces the book value of fixed assets.

Accumulated depreciation is classified as a current liability on the balance sheet.

Accumulated depreciation increases the reported value of property, plant, and equipment.

Accumulated depreciation represents cash set aside to replace assets.

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Verified step by step guidance

Understand the concept of accumulated depreciation: Accumulated depreciation is the total amount of depreciation expense that has been recorded for a fixed asset over its useful life. It is not a liability or cash set aside but rather a contra-asset account.

Recognize the classification of accumulated depreciation: It is classified as a contra-asset account on the balance sheet, meaning it reduces the value of the related asset (e.g., property, plant, and equipment).

Clarify the impact on book value: Accumulated depreciation reduces the book value of fixed assets, which is calculated as the original cost of the asset minus accumulated depreciation.

Eliminate incorrect statements: Accumulated depreciation is not classified as a current liability, does not increase the reported value of property, plant, and equipment, and does not represent cash set aside to replace assets.

Identify the correct statement: The correct statement is that accumulated depreciation is a contra-asset account that reduces the book value of fixed assets.