Question

Accumulated depreciated accounts are called ____________________________________________. This is because the accumulated depreciation accounts are deducted from their related fixed asset accounts on the balance sheet.

Answer 1

Accumulated depreciation accounts are referred to as contra asset accounts, which are represented in a T-account and subtracted from their related asset accounts to reflect the net asset value on a company's balance sheet.

Step-by-step explanation:

Accumulated depreciation accounts are called contra asset accounts. This is because the accumulated depreciation accounts are deducted from their related fixed asset accounts on the balance sheet. In accounting, a T-account is used to represent this relationship, with the assets on the left side and liabilities on the right side.

For example, if a company owns a piece of machinery worth $100,000 with an accumulated depreciation of $20,000, the T-account will show the machinery account at $100,000 on the left and a contra asset account for accumulated depreciation at $20,000 on the right, effectively valuating the machinery at $80,000 on the balance sheet. The use of T-accounts is common in all firms and helps in ensuring that the assets will always equal liabilities plus net worth, as seen in the bank's T-account example, which considers assets such as reserves and U.S. Government Securities, and liabilities including customer deposits and net worth.