What type of account is accumulated depreciation?

• A. Asset
• B. Contra-asset account
• C. Liability
• D. Revenue

Answer: (B)

Accumulated depreciation is a contra-asset account. It records the total depreciation charged against a fixed asset over time and is shown on the balance sheet as a deduction from the asset’s cost to arrive at its net book value. It is not an asset itself because it does not provide future economic benefits; instead, it represents the portion of the asset’s cost that has already been expensed. It is not a liability or revenue. The normal balance is a credit, opposite to the debit balance of asset accounts. Each period, depreciation expense is debited and accumulated depreciation is credited, increasing this contra-asset. For example, if equipment costs $50,000 and has $15,000 accumulated depreciation, the equipment would be shown at $35,000 on the books for net value.