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Q3-6DQ

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Financial & Managerial Accounting
Found in: Page 139
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

What contra account is used when recording and reporting the effects of depreciation? Why is it used?

An accumulated depreciation account is used as a contra account because it helps in better disclosure.

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Step by Step Solution

Definition of contra account

It is an account used to decrease the value of the account related to the contra account.

Contra account for depreciation

Accumulated depreciation is used as a contra account while recording depreciation. It is used to show the full cost of assets and the total depreciation of the assets. This asset is shown at its actual cost at the time of purchase and then depreciation on the asset during the useful life is shown as a deduction from that cost.

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