What is the contra account for revenue?
Contra Revenue Account The contra revenue accounts commonly used in small-business accounting include sales returns, sales allowance and sale discounts. A contra revenue account carries a debit balance and reduces the total amount of a company’s revenue.
Why are contra revenue accounts used rather than directly deducting from the sales revenue account?
In other words, its expected balance is contrary to—or opposite of—the usual credit balance in a revenue account. A contra revenue account allows a company to see the original amount sold and to also see the items that reduced the sales to the amount of net sales.
Which account is an example of a contra revenue account?
A revenues account with a debit balance instead of the usual credit balance. Examples include sales returns, sales allowances, and sales discounts.
Is sales revenue a contra asset?
Contra asset accounts are recorded with a credit balance that decreases the balance of an asset. Therefore, sales returns and allowances is considered a contra-revenue account, which normally has a debit balance. Key examples of contra asset accounts include allowance for doubtful accounts and accumulated depreciation.
What is contra account example?
contra account definition. 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.
What are contra accounts used for?
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 the purpose of using contra accounts?
A contra account is an account used in a general ledger to reduce the value of a related account. They are useful to preserve the historical value in a main account while presenting a decrease or write-down in a separate contra account that nets to the current book value.
How do you record contra revenue?
Contra revenue transactions are recorded in contra revenue accounts that typically reflect a debit instead of a credit. The most common contra revenue accounts are for sales allowances, discounts, and returns.
What is a contra account in accounting?
What is contra account in accounting?
How do I create a contra account?
If contra assets appear in the credit column, record contra liabilities on side. You may use accounting software packages, such as QuickBooks Online to set up contra accounts. Simply hit Control + N under the Chart of Accounts or Edit, then click New (to create a new account).
What is a contra account example?
An account with a balance that is the opposite of the normal 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.
What do you mean by contra revenue account?
Contra Revenue Contra revenue refers to any difference between a company’s gross sales and net sales due to sales returns, allowances or discount. A contra revenue account always has a debit balance. read more
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 a contra AC of the sales account?
Sales Returns- Sales returns is a Contra Ac of the sales account. This transaction records when a customer returns the paid goods, and a refund needs to be given. Sales Allowances- Sales allowances are also a part of the sales account.
Which is the correct method for recording a contra account?
There are two major methods of recording a contra account. The allowance method of accounting enables a company to determine the amount reasonable to be recorded in the contra account. The percentage of sales method assumes that a fixed percentage of goods or services sold by a company cannot be received.