Which of the following is a contra-asset account?

• A. Accumulated Depreciation
• B. Accounts Receivable
• C. Inventory
• D. Cash

Answer: (A)

A contra-asset account is an account that offsets or reduces the value of a related asset on the balance sheet. Accumulated Depreciation does exactly that: it accumulates depreciation over time and is subtracted from the gross amount of depreciable assets to show the net book value. It normally has a credit balance, which is the opposite of the usual debit balance seen in asset accounts. This setup helps users see how much of the asset’s value has been used up or worn down.

The other items are standard assets themselves—cash, accounts receivable, and inventory—and they do not offset another asset’s value, so they aren’t contra-asset accounts.