Which Of The Following Would Not Be Classified As A Contra Account?

The correct options of this multiple choice questions (mcq) are A, E, I, J and K, as the Contra Accounts decrease the values of these relevant accounts which are sales revenue, purchases, accounts receivable, fixed assets (non-current assets) and inventory here. These contra accounts have opposite balances of their relevant accounts. For example, sales revenue has credit balance while its contra revenue accounts have debit balances, so the contra revenue accounts decrease the value of sales revenue account in the income statement.

The option A shows Sales Revenue which is recorded in Income Statement for the period. The contra revenue accounts for sales revenue are Sales returns & allowances and discounts which reduce the balance of sales revenue in Income Statement.

The option E is also correct option as it shows purchases which decreases when purchases returns & allowances and purchases discounts are occurred, which are contra expense accounts and deducted from purchases in income statement prepared for the current accounting period of company’s business.

The option I shows accounts receivable, which is decreased on balance sheet due to allowance for doubtful accounts as some percentage of sales or accounts receivable may not be recovered from customers for the goods or merchandise sold on account. Accounts receivable is recorded at net realizable value in order to give true give true and fair view of financial statements to the users of accounting information.

The option J shows Fixed Assets or Non-Current Assets, which are deducted on balance sheet by the amount of accumulated depreciation calculated at the end of the accounting period.

The option K is also correct account here as Inventory is an asset which is decreased due to allowance for obsolete inventory account, which is a contra inventory account. It is possible that there is inventory shrinkage due to damage, stolen or error, then there is a need to adjust the value of inventory.