Contra Account
All accounts have corresponding contra accounts depending on what transaction has taken place i.e. when a vehicle is purchased using cash, the asset account "Vehicles" is debited as the vehicle account increases, and simultaneously the asset account "Bank" is credited due to the payment of the vehicle using cash. Some balance sheet items have corresponding contra accounts, with negative balances, that offset them. Examples are accumulated depreciation against equipment, and allowance for bad debts against long-term notes receivable.
Read more about this topic: Debits And Credits
Famous quotes containing the words contra and/or account:
“What is this that roareth thus?
Can it be a Motor Bus?
Yes, the smell and hideous hum
Indicat Motorem Bum ...
Domine, defende nos Contra hos Motores Bos!”
—Alfred Godley (1856–1925)
“Conversation is a traffick; and if you enter into it, without some stock of knowledge, to ballance the account perpetually betwixt you,—the trade drops at once: and this is the reason ... why travellers have so little [good] conversation with natives,—owing to their [the natives’] suspicion ... that there is nothing to be extracted from the conversation ... worth the trouble of their bad language.”
—Laurence Sterne (1713–1768)