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 ?
Apart from the all-time high gross gaming revenues (GGR) registered across all segments, Bloomberry's first quarter profitability was enhanced by P738 million in foreign exchange gains as well as lower promotional allowance and contra account margin, such as allowance for uncollectible receivables.
"The Company's remarkable performance in the first quarter of 2018 was the result of all-time high GGR (gross gaming revenues) registered across all segments and lower promotional allowance and contra account margin," Bloomberry said.
The write-down of the ROU asset via the contra account allows the impairment loss to be taken in the period it occurs, while the subsequent amortization of the contra account allows the net amortization or rent expense to reflect the underlying asset's lowered usefulness to the lessee.
This account is an example of a "contra account." A contra account is a financial statement item that subtracts from another account.