What term describes a contra-asset?

A contra-asset is an account that offsets the value of a related asset account on the balance sheet. Accumulated Depreciation is specifically a contra-asset account used to record the total depreciation expense that has been allocated to an asset over time, effectively reducing the carrying value of that asset on the balance sheet.

For example, if a company owns equipment purchased for $50,000 and has accumulated $10,000 in depreciation, the equipment would be reported on the balance sheet at its net book value of $40,000, which is the original cost minus the accumulated depreciation. This highlights the importance of accumulated depreciation as it helps provide a clearer picture of the asset's current value to stakeholders.

In contrast, accumulated income does not relate to asset valuation since it usually pertains to a company’s revenue or earnings, while current assets and long-term liabilities are different classifications of accounts, neither of which represents a contra-asset. Current assets include cash, accounts receivable, and inventory, while long-term liabilities consist of debt obligations due in more than one year, such as bonds payable. Therefore, the term that accurately describes a contra-asset is Accumulated Depreciation.