Question

Accumulated depreciation account and allowance for doubtful accounts account are two examples of contra asset accounts. The normal balance of these two accounts would be:

a. Debit
b. Credit
c. Neutral (Zero balance)
d. None of the above

Answer 1

The normal balance of the accumulated depreciation account and allowance for doubtful accounts account, which are contra asset accounts, is a credit. These accounts serve to reduce the balance of their related asset accounts which have a debit balance.

Step-by-step explanation:

Normal Balance of Contra Asset Accounts

The accumulated depreciation account and the allowance for doubtful accounts account are indeed two examples of contra asset accounts. These types of accounts are used to decrease the balance of a related account. The normal balance of contra asset accounts is a credit because they are intended to offset the corresponding asset accounts, which typically have a debit balance. Therefore, the correct answer to this question is b. Credit.

In accounting, contra asset accounts carry a credit balance as opposed to typical asset accounts which have a debit balance. This is reflected in the T-account structure, where the left side represents assets and the right side shows liabilities and net worth. Accumulated depreciation reduces the value of capital assets over time, whereas the allowance for doubtful accounts reduces the amount of receivables recognized, accounting for potential losses from uncollectible accounts.