What Is a Contra Asset?

contra asset account

The difference, which is $500, is thus listed as a discount on bonds payable and is debited to the contra liability account “discount on bonds payable.” Sometimes, both accounts can be written in a single line if they don’t represent a large portion of the assets. In case the CA account is not listed in the balance sheet, it must be listed in the footnotes of the financial statement for the users to be informed. The method of estimating uncollectible accounts expense based on the accounts receivable balance emphasizes the determination of the net realizable value of the receivables. A contra account is a balance sheet account that is used to offset a related asset, liability, or equity account. Contra accounts are used to ensure the proper valuation of these items is reflected on the balance sheet. Accumulated Depreciation contra account contains the cumulative sum total of all the depreciation expenses that have been charged against those fixed assets over time.

contra asset account

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Company

A major example of a contra account is the accumulated depreciation. Again, accumulated depreciation reduced fixed and capital asset balances. https://www.bookstime.com/ Apple breaks out its amount of property, plant, and equipment (PP&E) and then lists its accumulated deprecation that reduces the PP&E figure.

contra asset account

A contra asset account is an account in the balance sheet that offsets the balance of a regular asset account. Adjunct accounts and contra accounts may be seen on the balance sheet and chart of accounts of certain companies. This is dependent on if they have receivable accounts and depreciation accounts. The balance in the allowance for doubtful accounts is used to find out the dollar value of the current accounts receivable balance that is deemed uncollectible. The balance sheet shows the amount in the asset section underneath the accounts receivable. The net value of both these figures is usually reported on a third line.

Contra Equity Account

A contra asset is a negative account used in double-entry accounting to reduce the balance of a paired asset account in the general ledger. It can retire the shares, meaning that they will no longer be existent on the company’s financial statements as treasury stock.

Where does a contra asset go on a balance sheet?

A contra account offsets the balance in another, related account with which it is paired. Contra accounts appear in the financial statements directly below their paired accounts. Sometimes the balances in the two accounts are merged for presentation purposes, so that only a net amount is presented.