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.