The Accumulated Depreciation account is shown on the balance sheet as a liability. 1. is a contra asset account with a credit balance. 2. is shown as an expense on the income statement. 3. is a contra revenue account with a debit balance.

Option 1 is correct because accumulated depreciation account is contra asset account and has a credit balance that is adjusted in the balance sheet. This accumlated depreciation is adjusted against the value of the asset when the asset is sold or disposed off.

Explanation:

Other options are incorrect because Accumulated depreciation is contra asset account and is credit in nature, not debit in nature. Furthermore, saying that accumulated depreciation account is contra revenue account which is also incorrect.

1. is a contra asset account with a credit balance.

Explanation:

Depreciation means reduction in the value of an asset due to reasons such as wear and tear, obsolescence and passage of time. It is type of a provision. Depreciation is deducted from the value of an asset on a regular basis that is on a yearly basis.

Accumulated depreciation on the other hand means collection of depreciation on an asset for a period of time until and unless that particular asset is disposed off. It is not provided on the asset on a regular or yearly basis.

Accumulated depreciation account is a contra asset account with a credit balance because this is the only account which is though a liability with a credit balance is shown on the assets side of the balance sheet proving it a contra asset.

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