Contra account definition
Contra account is the opposite account, related to the main account. The aim of contra account is to reduce balance of the main account and provide a separate and clear data in the accounting on the substance of such decrease.
Contra account balances do decrease balances of the main accounts and then the net balance is reported in the financial statements.
Contra asset account
Analyzing the question what is a contra asset account, its essence is clear.
As asset accounts have debit balances, contra asset account will have credit balance. This is done in order to separate data in these accounts for the analysis and presentation purposes.
One of the contra accounts examples is:
accumulated depreciation account, which is asset contra account.
Accumulated depreciation is accounted on the credit side and has credit balance. Accumulated depreciation reduces costs of asset and contra account is used to have cost value and accumulated depreciation separately.
On the balance sheet net amount, i.e. net book value of the asset is presented, which is a difference between:
- Asset account – Cost account, and
- Contra Asset account – Accumulated depreciation.
Both accounts represent part of Asset category.
Other contra account examples can be Allowance for Doubtful Accounts (also contra asset account), Bond discounts, which represent contra liability account, i.e. decrease bond payable account.
Contra revenue account
Contra accounts are also applicable for Income Statement accounts. These accounts have to be closed at the end of the accounts period in the same way as the main Income Statement accounts are being closed.
Contra revenue account is an opposite account to revenue, which decreased gross revenue balance and the result is called net revenue.
For example, Sales returns and allowances is a contra-revenue account, in which sales returns and allowances are separately accounted for in order to have a separate data for such items.
Sales discounts also represent contra revenue account.
Balance of such accounts are under debit side, while revenue balances are under credit side.
Income Statement might present:
- Gross Revenue
- Contra Accounts
- Net Revenue, as the result between Gross Revenue and Contra Revenue accounts
The Most Popular Accounting & Finance Topics:
- Balance Sheet
- Balance Sheet Example
- Classified Balance Sheet
- Balance Sheet Template
- Income Statement
- Income Statement Example
- Multi Step Income Statement
- Income Statement Format
- Common Size Income Statement
- Income Statement Template
- Cash Flow Statement
- Cash Flow Statement Example
- Cash Flow Statement Template
- Discounted Cash Flow
- Free Cash Flow
- Accounting Equation
- Accounting Cycle
- Accounting Principles
- Retained Earnings Statement
- Retained Earnings
- Retained Earnings Formula
- Financial Analysis
- Current Ratio Formula
- Acid Test Ratio Formula
- Cash Ratio Formula
- Debt to Income Ratio
- Debt to Equity Ratio
- Debt Ratio
- Asset Turnover Ratio
- Inventory Turnover Ratio
- Mortgage Calculator
- Mortgage Rates
- Reverse Mortgage
- Mortgage Amortization Calculator
- Gross Revenue
- Semi Monthly Meaning
- Financial Statements
- Petty Cash
- General Ledger
- Allocation Definition
- Accounts Receivable
- Impairment
- Going Concern
- Trial Balance
- Accounts Payable
- Pro Forma Meaning
- FIFO
- LIFO
- Cost of Goods Sold
- How to void a check?
- Voided Check
- Depreciation
- Face Value
- Contribution Margin Ratio
- YTD Meaning
- Accrual Accounting
- What is Gross Income?
- Net Income
- What is accounting?
- Quick Ratio
- What is an invoice?
- Prudent Definition
- Prudence Definition
- Double Entry Accounting
- Gross Profit
- Gross Profit Formula
- What is an asset?
- Gross Margin Formula
- Gross Margin
- Disbursement
- Reconciliation Definition
- Deferred Revenue
- Leverage Ratio
- Collateral Definition
- Work in Progress
- EBIT Meaning
- FOB Meaning
- Return on Assets – ROA Formula
- Marginal Cost Formula
- Marginal Revenue Formula
- Proceeds
- In Transit Meaning
- Inherent Definition
- FOB Shipping Point
- WACC Formula
- What is a Guarantor?
- Tangible Meaning
- Profit and Loss Statement Template
- Revenue Vs Profit
- FTE Meaning
- Cash Book
- Accrued Income
- Bearer Bonds
- Credit Note Meaning
- EBITA meaning
- Fictitious Assets
- Preference Shares
- Wear and Tear Meaning
- Cancelled Cheque
- Cost Sheet Format
- Provision Definition
- EBITDA Meaning
- Covenant Definition
- FICA Meaning
- Ledger Definition
- Allowance for Doubtful Accounts
- T Account / T Accounts
- Contra Account
- NOPAT Formula
- Monetary Value
- Salvage Value
- Times Interest Earned Ratio
- Intermediate Accounting
- Mortgage Rate Chart
- Opportunity Cost
- Total Asset Turnover
- Sunk Cost
- Housing Interest Rates Chart
- Additional Paid In Capital
- Obsolescence
- What is Revenue?
- What Does Per Diem Mean?
- Unearned Revenue
- Accrued Expenses
- Earnings Per Share
- Consignee
- Accumulated Depreciation
- Leashold Improvements
- Operating Margin
- Notes Payable
- Current Assets
- Liabilities
- Controller Job Description
- Define Leverage
- Journal Entry
- Productivity Definition
- Capital Expenditures
- Check Register
- What is Liquidity?
- Variable Cost
- Variable Expenses
- Cash Receipts
- Gross Profit Ratio
- Net Sales
- Return on Sales
- Fixed Expenses
- Straight Line Depreciation
- Working Capital Ratio
- Fixed Cost
- Contingent Liabilities
- Marketable Securities
- Remittance Advice
- Extrapolation Definition
- Gross Sales
- Days Sales Oustanding
- Residual Value
- Accrued Interest
- Fixed Charge Coverage Ratio
- Prime Cost
- Perpetual Inventory System
- Vouching
Return from Contra Account to https://accountingcorner.org