Final answer:
The statement that a contra asset account is subtracted from a related account on the balance sheet is true, as evidenced by the example of accumulated depreciation reducing the value of assets on a balance sheet.
Step-by-step explanation:
A contra asset account is indeed subtracted from a related account on the balance sheet, confirming the initial statement to be true. For example, accumulated depreciation is a contra asset account used to reduce the carrying value of an asset over its useful life. Firms use the T-account format to organize their balance sheets, where assets are on the left, and liabilities, along with net worth, are on the right. In the case of banks, assets include reserves, loans made, and securities like U.S. treasury bonds, while liabilities encompass deposits and money owed by the bank. The equilibrium maintained in the T-account is such that assets must always equal the sum of liabilities and the bank's net worth.