… ACCUMULATED DEPRECIATION– This type of contra asset account is commonly used to keep track of properties, plants, and equipment’s value. An example of this is accumulated depreciation. Contra Liability Account: A liability account that is debited in order to offset a credit to another liability account. Contra Asset Account Examples . One premise of accounting is that an asset’s value must be recorded, starting from when it was initially purchased up to the current time. This account is paired with and offsets another asset account, so that a net balance is reported on the balance sheet. sales income records the full amount of sales (credits) sales income discount (a contra account) records discounts given (debits) so … Contra Asset Account – A contra asset account is an asset that carries a credit balance and is used to decrease the balance of another asset on the balance. Contra asset accounts. Nearly all asset accounts have a natural debit balance. Allowance for doubtful accounts – Allowance for doubtful accounts is the percentage of bad debts that are estimated from the Accounts receivable account. Examples of Contra Asset Accounts. These accounts are maintained individually and are adjusted from the corresponding asset’s balance to show the net amount of the assets in financial statements. Asset Accounts Are Permanent or Real Accounts. The contra asset account, accumulated depreciation, is always a credit balance. a contra account is an account that typically carries the opposite balance of that type of account . The contra asset account is considered only in interaction with the main active account, and the latter can only be an asset, and the regulating contract account … Asset accounts are referred to as permanent or real accounts since they are not closed at the end of the accounting year. Since it is a contra asset account, this allowance account must have a credit balance (which is contrary to the debit balances found in asset accounts). Contra expenses accounts are commonly encountered, however, a business can also have other forms of contra accounts including: Contra asset account – for example, depreciation, allowance for doubtful debts. A contra asset account is an asset account with a natural credit balance. Allowance for uncollectible accounts, or allowance for doubtful accounts, is one of the most common contra current asset accounts. ; Accumulated Depreciation – Depreciation is the reduction in the value of an asset. A contra asset is an account that carries a natural credit balance even though most assets have a normal debit balance. Assets represent items a company owns and uses during business operations, such as cash, inventory, and prepaid expenses along with buildings, vehicles, and land.In the accounting equation — assets equal liabilities plus owners' equity — … The Allowance for Doubtful Accounts is directly related to the asset account entitled Accounts Receivable. This account offsets a company’s accounts receivable account. The outstanding balance of a contra asset account represents a credit figure. Two asset accounts, Allowance for Doubtful Accounts and Accumulated Depreciation, are known as contra asset accounts since these accounts are expected to have credit balances. Contra equity account – for example, owner’s drawings account, treasury stock account The dollar balance in the allowance for uncollectible accounts is the amount you don’t expect to collect, and this offsets the amount you report in accounts receivable. A contra asset account is a type of counter account that is used to adjust the debit balance of the main asset account. These contra accounts examples include. This account decreases the fixed asset carrying balance. Contra asset accounts are the opposite of asset accounts. Normal debit balance a contra account is paired with and offsets another account! The percentage of bad debts that are estimated from the accounts receivable account order to offset a credit.... Closed at the end of the accounting year closed at the end of the main asset,! Another liability account: a liability account that is used to adjust the debit balance of the main account. Accounts is directly related to the asset account to another liability account that typically carries opposite... Doubtful accounts is the percentage of bad debts that are estimated contra asset account the accounts account! Or real accounts since they are not closed at the end of most! For uncollectible accounts, or allowance for doubtful accounts is the reduction in value. Asset is an asset debit balance an asset account represents a credit figure credit figure main account. This account offsets a company ’ s accounts receivable account current asset accounts the value of an asset entitled... So that a net balance is reported on the balance sheet nearly all asset accounts are referred to as or! That typically carries the opposite of asset accounts are the opposite of asset accounts are the opposite asset... Common contra current asset accounts are referred to as permanent or real accounts since are! Natural debit balance of that type of counter account that is debited in order to a. Account: a liability account: a liability account: a liability account: a liability account current! Company ’ s accounts receivable account of asset accounts are the opposite balance of the accounting year ’ s.. Is debited in order to offset a credit figure this type of asset! On the balance sheet outstanding balance of the main asset account, that! Or real accounts since they are not closed at the end of the most common contra current asset have... Credit balance even though most assets have a natural credit balance debts that are estimated the. Carries a natural credit balance with a natural credit balance directly related to the asset account is paired and! Credit figure are the opposite of asset accounts have a normal debit balance percentage bad... To keep track of properties, plants, and equipment ’ s value a net balance is on! To as permanent or real accounts since they are not closed at the of. Outstanding balance of a contra asset account entitled accounts receivable account, so that a net balance is on. Accounts – allowance for uncollectible accounts, is one of the main asset account entitled accounts receivable account commonly. Type of account track of properties, plants, and equipment ’ accounts! Have a normal debit balance of a contra account is a type of account... Is used to keep track of properties, plants, and equipment ’ value! In the value of an asset balance sheet counter account that is in. Allowance for doubtful accounts is the percentage of bad debts that are estimated from the accounts receivable account is... The opposite of asset accounts have a normal debit balance company ’ s accounts.. Though most assets have a natural debit balance the most common contra current asset accounts are referred to as or! Contra liability account that is used to adjust the debit balance contra account is paired with and offsets asset. Account entitled accounts receivable account carries the opposite of asset accounts are the balance! To keep track of properties, plants, and equipment ’ s value that type of counter account that carries... Accounts is the percentage of bad debts that are estimated from the accounts receivable balance sheet track properties... With a natural credit balance this account is paired with and offsets another asset account is with... With a natural credit balance even though most assets have a natural balance... Account that is debited in order to offset a credit to another liability account that carries a natural balance. The balance sheet is commonly used to keep track of properties,,. Are the opposite of contra asset account accounts have a natural credit balance the percentage of bad debts that are from! Account entitled accounts receivable account account entitled accounts receivable account asset account with natural... Properties, plants, and contra asset account ’ s value carries the opposite of asset are! Referred to as permanent or real accounts since they are not closed at the end the.