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A Contra Expense Account is the reversal of relevant Expense Account on Income Statement . The most famous Examples are Purchase Returns, Purchase Allowance and Purchase Discount.  These are deducted from Total Purchases or Gross Purchases. 1. Purchase Returns Contra Expense Account Purchase Returns are the returning of goods by customers to suppliers due to defective goods or any other valid reasons it is an contra expense account, so it is deducted from total purchases on Income Statement / Statement of Profit And Loss Account. 2. Purchase Allowances Contra Expense Account Purchases allowance is the retaining of goods by customer as the seller offers a lower price than standard price due to minor defective in goods i.e., paint quality of table is not so good as required by the customer but he retains due to lower price and accept this offer, etc. It is also deducted from Gross Purchases. 3. Purchase Discount Contra Expense Acc...

Purchase Allowance Contra Expense Accounting | Purchases Allowances Journal Entry Purchase Allowance is the reduction of Purchase Price given by Seller (Supplier) to Buyer ( Accounts Payable ) when the purchaser agrees to retain the goods that have some minor defects or having below Standard quality. The buyer needs that goods so much and accept the offer of the seller at a lower standard price. It is also k nown as Purchase Allowance Contra Expense Account as it is deducted from Total Purchases on Income Statement or Profit And Loss Account at the end of accounting period. You Can Also Read Out, “ What Are Sales Allowances ” Purchase Allowance has no balance so it is closed by transferring it to the Income Statement / Statement or Comprehensive Income at the end of an Accounting Period. However, Rules of Debit And Credit For Expenses is also the same and applicable for Purchase Allowance i.e., when it increases we debit it and when it decreases, ...