Which of the following is a contra asset account?

• A. Allowance for Doubtful Accounts
• B. Accounts Receivable
• C. Accumulated Depreciation
• D. Prepaid Insurance

Answer: (A)

Contra asset accounts carry credits and reduce the value of a related asset on the balance sheet. The Allowance for Doubtful Accounts is the offset for Accounts Receivable, lowering the amount the company expects to collect to net realizable value. Accounts Receivable itself is the asset, not a contra account, so it isn’t reducing another balance. Prepaid Insurance is simply an asset representing payments made in advance, not an offset to another asset. Accumulated Depreciation is also a contra asset (against fixed assets), but this question highlights the receivables side, making the allowance for doubtful accounts the most directly relevant example.