Contra Account

Last Updated: Jun 6, 2019

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A Contra Account is an account on the same financial ledger as an equivalent account and is used to reduce the value of such equivalent account. The contra account's values offset those of the equivalent account, such that, if a debt is recorded in the equivalent account, for example, a credit is simultaneously recorded in the contra account. One of the most common examples is the allowance for doubtful accounts in relation to its contra account, accounts receivable. Another example is an asset's depreciation, which is subtracted from its original price to calculate its book value. In this case, the depreciation and the original price are contra accounts with respect to each other.