---
title: "Contra account"
description: "What a contra account is, common contra asset, contra liability and contra revenue accounts, why they keep the original amount visible, and journal entry examples."
canonical: https://ledgeriano.com/glossary/contra-account
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Contra account

> What a contra account is, common contra asset, contra liability and contra revenue accounts, why they keep the original amount visible, and journal entry examples.

A contra account carries a balance opposite to the account it is paired with and reduces it on the financial statements. Accumulated depreciation, for example, has a credit balance that reduces the cost of fixed assets. Contra accounts keep the original amount visible while still reporting the net figure.

Using a contra account rather than reducing the main account directly preserves information. The balance sheet can show equipment at cost of 50,000 less accumulated depreciation of 20,000, rather than just 30,000, which tells readers how old the assets are.

Common examples: contra assets (accumulated depreciation, allowance for doubtful debts, inventory write-down allowance), contra revenue (sales returns, sales discounts) and contra liabilities (discount on bonds payable). Each has the opposite [normal balance](https://ledgeriano.com/glossary/normal-balance) of its partner.

In a chart of accounts, place each contra account directly under the account it reduces and flag it as contra so totals and ratio calculations treat it correctly.

## Example: allowance for doubtful debts

Receivables of 45,000 are expected to include 2,000 that will not be collected. The allowance (a contra asset) reduces receivables to a net 43,000 without writing off any specific customer yet.

| Account | Debit | Credit |
| --- | --- | --- |
| Bad debt expense | 2,000 |  |
| Allowance for doubtful debts (contra asset) |  | 2,000 |

### Is a contra account an asset or a liability?

It takes the classification of the account it reduces. Accumulated depreciation is presented within assets even though it has a credit balance.

### Why not just reduce the asset directly?

Because the gross amount is useful information and some rules, such as the cost model for fixed assets, require cost and accumulated depreciation to be disclosed separately.