What is the relationship between contra accounts and their related accounts?

The relationship between contra accounts and their related accounts is based on their opposite normal balances. A contra account is designed to offset or reduce the balance of a related account, usually resulting in a net balance for financial reporting purposes. For example, the accumulated depreciation account serves as a contra asset account to a fixed asset like equipment. While the equipment account has a normal debit balance, accumulated depreciation has a normal credit balance. This opposition in balances allows for a clearer presentation of financial information. It helps users understand the true value of an asset by indicating how much of its value has been consumed over time.

The other options do not accurately reflect the nature and purpose of contra accounts. For example, contra accounts do not have the same balance as their related accounts, as their purpose is to reduce that balance. They are also not created solely for legal reasons, and while some contra accounts can be permanent, this characteristic does not apply universally to all contra accounts, as some can be temporary, depending on the nature of the transactions they relate to.