What is Contra Account

Contra Account is the reversal or deduction on different Kinds / Types of Accounts. It may be an estimation or actual amount deducted from accounts. There are five types of Contra Accounts.

1. Contra Asset Account

The most widely and famous type is Contra Asset Account. It is estimated on Assets and deducted from the Closing Balances of Relevant Asset on Balance Sheet. Examples are Accumulated Depreciation, Allowance For Doubtful Accounts.

2. Contra Liabilities Account

It is used to deduct the balance of relevant Liabilities on Balance Sheet. Example is Discount on Loan Payable Account, etc.

3. Contra Equity Account

It is the reversal from Equity Account of the business. Examples are Owner's Drawings Account in case of Sole Proprietorship and Dividend Account in case of Company and Treasury Stock Account in case of Corporations (Larger Business Organizations). Drawings Account is deducted from closing balance of Capital to find its value on Balance Sheet. Dividend is deducted from closing Equity by preparing Statement of Changes in Equity in order to find the value of Equity on Balance Sheet.

4. Contra Revenue Account

It is deducted from relevant Total Revenue or Gross Revenue. It is not estimated but either it is the actual deduction or need to be deducted from relevant income (Sales) in case of goods damaged, or other reasons that make customer to return the goods to seller.

Contra Revenue Account consists of:

(i) Sales Returns

When goods returned to seller by customer as goods are damaged or customer finds them unsatisfactory or not according to order specified. Sales Return is deducted from Gross Sales in Income Statement / Profit And Loss Account.

(ii) Sales Allowances

Sales Allowance is the reduction of selling price when customer finds lower quality products delivered to him. The customer agrees to retain the goods at a selling price below standard.

(iii) Sales Discounts

Sales Discounts is given by seller to customer when he makes payment before due date. It is also deducted from Gross Sales in Income Statement.

So, we can say that Contra Accounts are the reversal of relevant accounts and these are deducted from Closing Balances, in case of Assets, Liabilities and Equity while these are deducted from Gross Amount or Total Amount in case of Revenues / Incomes.

5. Contra Expense Account

It is deducted from relevant Total Expenses or Gross Expenses (i.e,. Total Purchases) on Income Statement / Profit And Loss Account. Examples are Purchase Returns Contra Expense Account, Purchase Allowances Contra Expense Account and Purchase Discount Contra Expense Account.

Contra Accounts List

Below are Contra Accounts List alongwith their Types

1. Contra Assets Accounts List

(i). Accumulated Depreciation

(ii). Allowance For Doubtful Accounts

(iii). Reserve For Obsolete Inventory / Stock / Merchandise

2. Contra Liability Account List

(i) Discount on Loans Payable Account

3. Contra Equity Accounts List

(i) Owner’s Drawings Account (For Sole Proprietorship)

(ii) Dividend Account Account (For Company)

(iii) Treasury Stock Account (For Corporations)

4. Contra Revenue Accounts Lists

(i) Sales Returns

(ii) Sales Discount

(iii) Sales Allowances


5. Contra Expense Accounts Lists


(i) Purchase Returns

(ii) Purchase Discounts

(iii) Purchase Allowances