Question

The contra account of a relative plant asset will:

increase the balance.
reduce the balance.
result in no change in the balance.
none of the above

Answer 1

reduce the balance.

Step-by-step explanation:

Contra account is the opposite account to the given account.

Here, we are discussing asset account. As we know, assets have a debit balance for example: Plant & Machinery Account.

Now, contra to this can be accumulated depreciation account, which carries a credit balance as this will have a decreasing effect on value of Plant and Machinery.

Thus, a contra account will reduce the balance of relative plant asset.

Correct option is

b) reduce the balance.