What type of account typically enhances the understanding of financial statements for external parties?

The correct choice is a contra-account, as it plays a significant role in enhancing the understanding of financial statements for external parties, such as investors and creditors. Contrary to a regular account that reflects assets, liabilities, revenues, or expenses directly, contra-accounts provide additional context by offsetting the balances of related accounts.

For example, a contra-asset account like "Accumulated Depreciation" reduces the book value of fixed assets on the balance sheet. This information is crucial for external users who want to assess the true economic value of the firm's assets over time, rather than just seeing the gross amount.

Moreover, contra-accounts help portray a more accurate financial position of the company, improving transparency and aiding stakeholders in making informed decisions. They enhance the clarity of financial reporting by illustrating reductions to primary account balances, which are essential for a comprehensive understanding of financial health.