What is Contra Revenue Account In Accounting - Definition - Meaning - Examples

Contra Revenue Account or Contra Income Account is the reversal of relevant Revenues / Incomes in Income Statement / Profit and Loss Account. Main types of Contra Revenue Accounts are Sales Returns, Sales Allowances and Sales Discount.

1. Sales Returns Contra Revenue Account

It is the returning of goods sold by customer due to damaged goods or any other defective or any other reasons and causes to return the goods to seller. It is deducted from Total Sales in Income Statement.

2. Sales Allowances Contra Revenue Account

It is the concession given by the seller to buyer in order induce the buyer to retain the goods at a lower standard price as goods are not so good as required by the buyer i.e., the goods has minor defects e.g. One Table Leg is not leveled to the surface but can be good for use in the office, etc.

3. Sales Discount Contra Revenue Account

It is the promotion, discounts offers or special discount promotions offered by the seller to buyer to give incentive them and leads to increase his sales at discounted price. It is also used for the prompt payment made by the buyer before deadlines or due date and sell lowers the selling price due to early payment. It also reduces the total sales in Income Statement as it is a contra revenue account.