In the adjusted trial balance, Accumulated Depreciation is classified as which type of account?

• A. Contra asset account (reduces the related asset account such as Equipment)
• B. Revenue account (increases net income over time)
• C. Expense account (recognized in the period as Depreciation Expense)
• D. Liability account (obligation to pay for the asset)

Answer: (A)

Verified step by step guidance

1. Understand the nature of Accumulated Depreciation: it represents the total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.
2. Recall that Accumulated Depreciation is not an expense itself, but rather a contra account that reduces the book value of the related asset on the balance sheet.
3. Identify that a contra asset account is paired with an asset account and has a credit balance, which offsets the debit balance of the asset account.
4. Recognize that Depreciation Expense is a separate account that appears on the income statement and reflects the depreciation cost for the current period.
5. Conclude that in the adjusted trial balance, Accumulated Depreciation is classified as a contra asset account because it reduces the carrying amount of the asset, such as Equipment.