{"id":298868,"date":"2022-03-22T17:42:23","date_gmt":"2022-03-22T20:42:23","guid":{"rendered":"http:\/\/ppgsc.uea.edu.br\/?p=298868"},"modified":"2024-08-29T05:39:42","modified_gmt":"2024-08-29T08:39:42","slug":"contra-asset-examples-how-a-contra-asset-account","status":"publish","type":"post","link":"https:\/\/ppgsc.uea.edu.br\/index.php\/contra-asset-examples-how-a-contra-asset-account\/","title":{"rendered":"Contra Asset Examples, How a Contra Asset Account Works"},"content":{"rendered":"<p><img decoding=\"async\" class='wp-post-image' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2022\/07\/total-manufacturing-cost.jpg\" width=\"258px\" alt=\"examples of contra accounts\"\/><\/p>\n<p>Asset accounts always maintain a debit balance, so anytime that you increase the value of an asset, such as when you deposit customer payments or invoice a customer, that asset account is debited or increased. Likewise, when you pay a bill, your cash account is reduced (credited) because you\u2019re lowering the balance. A contra expense account is an account used to reduce the amount of an expense without changing the balance in the main expense account. Examples of contra expense accounts include Purchase Returns, Purchase Discounts, and Advertising Reimbursements. Accumulated Depreciation acts as a subaccount for tracking the ongoing depreciation of an asset. Each year of an asset\u2019s life, another year of Depreciation Expense is  recorded.<\/p>\n<ul>\n<li>The concepts of debits and credits in accounting dictate how transactions are recorded.<\/li>\n<li>GAAP, the allowance for doubtful accounts represents management\u2019s estimate of the percentage of \u201cuncollectible\u201d accounts receivable (i.e. the credit purchases from customers that are not expected to be paid).<\/li>\n<li>Therefore, to ensure accounts receivable stays clean and transparent, CCC will record $2,500 in the contra asset account called \u201cAllowance for Doubtful Accounts\u201d.<\/li>\n<li>Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching.<\/li>\n<li>Get instant access to video lessons taught by experienced investment bankers.<\/li>\n<li>There is the existence of contra accounts in accounting which are accounts that have the purpose of decreasing the value of another specific account if the two accounts are netted or summed together.<\/li>\n<\/ul>\n<h2>Contra Asset<\/h2>\n<p>As mentioned, there can be a contra account for any type of transaction depending on a company\u2019s needs. Other than the above contra-asset accounts, we often see contra-revenue accounts for any sales returns or sales rebates. The following are examples of commonly-used contra asset accounts you could create to better understand your business financials. However, it\u2019s important to keep in mind that you can create any contra account you want to more clearly describe your business \u2014 this is not an exhaustive or definitive list.<\/p>\n<h2>How are contra accounts recorded?<\/h2>\n<div style='text-align:center'><iframe width='569' height='311' src='https:\/\/www.youtube.com\/embed\/jF_eyeyQayI' frameborder='0' alt='examples of contra accounts' allowfullscreen><\/iframe><\/div>\n<p>This way the company can report an item on the balance sheet at itsoriginal amount and show a reduction in value separately in order to report itsnet realizable value. A contra account is a ledger account related to another specificledger account. In fact, as the name \u201ccontra\u201d suggests, it is the opposite of aspecific class of account.<\/p>\n<h2>How to Record a Contra Account<\/h2>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2021\/08\/ad9ce20fa4.jpg\" width=\"252px\" alt=\"examples of contra accounts\"\/><\/p>\n<p>The most common contra type, contra assets, records the loss in value of any asset accounts listed in your general ledger. And by comparing these contras against their corresponding parent accounts, you can better <a href=\"https:\/\/accounting-services.net\/contra-entries\/\">contra expense account<\/a> understand the actual value of the assets retained by your business. Because contra asset accounts are used so frequently, it\u2019s worth spending a little bit more time on them here, including common subtypes.<\/p>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2016\/03\/502851076-300x200.jpg\" width=\"251px\" alt=\"examples of contra accounts\"\/><\/p>\n<h2>Everything You Need To Build Your Accounting Skills<\/h2>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2022\/05\/7d987627-0f73-4559-8e67-18247424a710-300x200.jpg\" width=\"256px\" alt=\"examples of contra accounts\"\/><\/p>\n<p>Note that the asset account balance represents the purchase price of the asset in question, also known as its historical cost. Hence, the term valuation account represents all types of balance sheet accounts related to their  corresponding balance sheet accounts. This helps the firms to evaluate the book value of their assets and liabilities.<\/p>\n<ul>\n<li>My Accounting Course \u00a0is a world-class educational resource developed by experts to simplify accounting, finance, &#038; investment analysis topics, so students and professionals can learn and propel their careers.<\/li>\n<li>We believe that sustainable investing is not just an important climate solution, but a smart way to invest.<\/li>\n<li>This means it received $4,500 in cash but needs to pay $5,000 back to the bondholders.<\/li>\n<li>Contra equity accounts are accounts in the equity section of the balance sheet that reduce the amount of equity a company holds.<\/li>\n<li>Including contra revenue accounts is important in the income statement because it shows the original amount of sales the firm has made, along with any factor that has reduced that amount.<\/li>\n<li>The hottest retail item of today can be relegated to nostalgia channels on YouTube tomorrow.<\/li>\n<li>Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.<\/li>\n<\/ul>\n<h2>Overview: What is a contra asset account?<\/h2>\n<p>Sometimes, both accounts can be written in a single line if they don&#8217;t represent a large portion of the assets. In case the contra asset 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 equity section of the balance sheet is where the shareholder&#8217;s claims to assets are reported. The main contra equity account is treasury stock, which is the balance of all stock repurchased by the company.<\/p>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2021\/04\/a12816e2-12cc-41d1-9758-32d3e5acc1a1-300x200.jpg\" width=\"257px\" alt=\"examples of contra accounts\"\/><\/p>\n<ul>\n<li>An estimate of bad debts is made to ensure the balance in the Accounts Receivable account represents the real value of the account.<\/li>\n<li>In other words, this account\u2019s credit balance is contrary to (or opposite of) the usual debit balance for an expense account.<\/li>\n<li>The accumulated depreciation will ultimately reduce the value of fixed assets when the two accounts are netted with each other.<\/li>\n<li>Inventory obsolescence is an expense account, while the allowance for obsolete inventory is a contra asset account, which aims to reduce the inventory valuation on your balance sheet.<\/li>\n<li>Key examples of contra asset accounts include allowance for doubtful accounts and accumulated depreciation.<\/li>\n<\/ul>\n<h2>Allowance for doubtful debt<\/h2>\n","protected":false},"excerpt":{"rendered":"<p>Asset accounts always maintain a debit balance, so anytime that you increase the value of an asset, such as when you deposit customer payments or invoice a customer, that asset account is debited or increased. Likewise, when you pay a bill, your cash account is reduced (credited) because you\u2019re lowering the balance. A contra expense [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"footnotes":""},"categories":[141],"tags":[],"class_list":["post-298868","post","type-post","status-publish","format-standard","hentry","category-bookkeeping"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/posts\/298868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/comments?post=298868"}],"version-history":[{"count":1,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/posts\/298868\/revisions"}],"predecessor-version":[{"id":298869,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/posts\/298868\/revisions\/298869"}],"wp:attachment":[{"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/media?parent=298868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/categories?post=298868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ppgsc.uea.edu.br\/index.php\/wp-json\/wp\/v2\/tags?post=298868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}