What is the purpose of a valuation account?

The purpose of a valuation account is to determine the estimated value of an asset. Valuation accounts provide an adjusted value for assets by accounting for certain factors such as depreciation, obsolescence, or potential market value fluctuations. By doing this, they present a more realistic and accurate reflection of an asset's worth on financial statements, which can influence financial analysis, investment decisions, and compliance with accounting standards.

In financial reporting, accurately reflecting the estimated value of assets is crucial for stakeholders to understand the true financial health of a business, guiding decisions related to investments, borrowing, and overall economic assessments. The other options do not align with the fundamental role of a valuation account, which specifically focuses on estimating asset values rather than recording actual values, tracking liabilities, or summarizing income and expenses.