Contra Account


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Contra Account

An account whose value offsets the value of an equivalent account. This applies whether the account is debited or credited. For example, two firms may have contra accounts in which each owes the other money. They might agree to offset the mutual debt and make a single payment to whichever is owed more. Perhaps the most common example of a contra account is an asset's depreciation, which is subtracted from its original price to calculate its book value. In this case, the depreciation and the original price are contra accounts with respect to each other.
References in periodicals archive ?
As the Company subsequently determined that the accounting standards require a contra account in the full amount of the asset, as the collection of this asset is not certain, a decision was made to adjust the balance sheets to record such contra account.
Accumulated depreciation," a contra account, is not netted against its related primary account, "furniture and fixtures.
Treasury stock is recorded as a contra account in the equity section of the balance sheet.