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34) The usual balance in a Contra-Liability account is a: A) It depends B) DR C) CR

User Bonson
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Final answer:

The usual balance in a Contra-Liability account is a debit (DR), (option B) This reflects the opposite balance of typical liabilities, which have a credit (CR) balance. An example of contra-liability is the bonds discount account, which reduces the liability value over time.

Step-by-step explanation:

The question asks about the usual balance in a Contra-Liability account. In accounting, a contra-liability account carries a balance that is opposite to the normal balance of a liability account. Since regular liability accounts typically have a credit (CR) balance, the contra-liability accounts will usually have a debit (DR) balance. Therefore, the correct answer to the question 'The usual balance in a Contra-Liability account is' would be option B) DR.

One example of a contra-liability account is the bonds discount account. When a company issues bonds for less than their face value, the discount on the bonds payable account (which is a contra-liability account) is debited. This discount effectively reduces the total amount of liability over the lifetime of the bonds as it is amortized. Similarly, when a business uses a contra-liability account, it is acknowledging that a reduction of liability will occur over time.

It's important to understand the concept of contra accounts as they are used to reduce the value of the related account. Contra-liability accounts are particularly useful in providing a more accurate financial picture by accounting for discounts, returns, or allowances on liabilities. Thus, maintaining the integrity of the business's financial statements.

User Indraforyou
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