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When a contra asset transaction is created, the offset is a charge to the income statement, which reduces profits. Contra revenue is a general ledger account with a debit balance that reduces the normal credit balance of a standard revenue account to present the net value of sales generated by a business on its income statement. Examples of revenue contra accounts are Sales Discounts, Returns and Allowances. However, the http://dancelib.ru/baletenc/item/f00/s02/e0002975/index.shtml “Allowance for Doubtful Accounts” (or “Allowance for Uncollectible Accounts”) is a contra account related to the concept of bad debts. This contra-asset account reduces the accounts receivable balance on the balance sheet to its net realizable value. The Allowance for Doubtful Accounts carries a credit balance that reduces the total amount of accounts receivable to show the amount that the company expects to collect.
What Is a Contra Account?
The difference between an asset's account balance and the contra account balance is...