In the case of account debtors owing money to the company in the form of an account receivable. It means that this customer is also a supplier and sells to the company as a vendor resulting in an account payable to the same entity. This situation results in a contra account that has offsetting possibilities. Therefore, most lenders do not like to lend on account receivables that fall into this category.
An account whose balance is subtracted from an associated account in the financial statement.
An account that partially or wholly offsets a related opposite account.
an account linked with another account and having an opposite normal balance
an account that carries a balance opposite to the normal balance
an account which offsets another account
An account in which two parties purchase goods and/or services from each other and the resulting receivables offset one another.
An account which is in opposition to another, that reduces the book value of assets, such as Allowance for Bad Debits.
An asset account that normally has a credit balance. The contra account is used to offset a related account. The approach is used so that the regular asset account is shown at the original or undiminished value. For example, accounts receivable has a contra account usually called allowance for doubtful accounts. Fixed assets have a contra account called accumulated depreciation.
An account created to offset another account. Eg: a Sales contra account would be Sales Discounts. They are accounts included in the same section of a set of books, which when compared together, give the net balance. Example: Sales=10,000 Sales Discounts=1,000 therefore Net Sales=9,000. This example, affecting the revenue side of a business, is also referred to as Contra revenue . The tell-tale sign of a contra account is that it has the oposite balance to that expected for an account in that section (in the above example, the Sales Discounts balance would be shown in brackets - eg. it has a debit balance where Sales has a credit balance).
An account that is offset or deducted from another account.
ACCOUNT considered to be an offset to another account. Generally established to reduce the other account to amounts that can be realized or collected.
In accounting, an account that accompanies a specified "companion" account—typically an asset account—and that has a normal balance that is the opposite of the companion account.
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account. Another example is the owner's drawing account. This is an owner's equity account and as such you would expect a credit balance. However, the drawing account has a debit balance. Other examples include (1) the allowance for doubtful accounts, (2) discount on bonds payable, (3) sales returns and allowances, and (4) sales discounts. The contra accounts cause a reduction in the amounts reported. For example net sales is gross sales minus the sales returns, the sales allowances, and the sales discounts. The net realizable value of the accounts receivable is the accounts receivable minus the allowance for doubtful accounts. To Top