A contra account is used in a general ledger to reduce the value of a related account when the two are netted together. A contra account’s natural balance is the opposite of the associated account. If a debit is the natural balance recorded in the related account, the contra account records a credit.
What is considered a contra account?
What is a Contra Asset Account? In bookkeeping, a contra asset account is an asset account in which the natural balance of the account will either be a zero or a credit (negative) balance. The account offsets the balance in the respective asset account that it is paired with on the balance sheet.
What are the contra accounts for purchases?
Purchase returns, allowances and discounts are all examples of contra expense accounts. The accounts normally have a credit balance and in use are offset against the purchases account which is normally a debit balance.
What is Depreciation a process of?
Depreciation is an accounting process by which a company allocates an asset’s cost throughout its useful life. In other words, it records how the value of an asset declines over time. For intangible assets—such as brands and intellectual property—this process of allocating costs over time is called amortization.
What are the types of control account?
Types of Control Accounts
- Bank account balances.
- Total purchases.
What does it mean to have a contra account?
The Contra Revenue Account. Contra revenue is a deduction from gross revenue, which results in net revenue. Contra revenue transactions are recorded in one or more contra revenue accounts, which usually have a debit balance (as opposed to the credit balance in the typical revenue account).
What’s the normal balance of a contra revenue account?
Contra expense normal balance: An expense is normally a debit balance so a contra expense account such as purchase returns is normally a credit balance. Contra revenue normal balance: Revenue is normally a credit balance so a contra revenue account such as sales returns is normally a debit balance.
What does Contra mean in double entry bookkeeping?
Contra means against. In double entry bookkeeping terms, a contra revenue account or contra sales account refers to an account which is offset against a revenue account.
Which is the most common contra asset account?
The Contra Asset Account The most common contra account is the accumulated depreciation account, which offsets the fixed asset account.
