2016-12-02 00:00:00 Finance and Accounting English Learn what a contra asset is, what it is used for, and read about some examples of contra asset account on a balance sheet. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/03/08214724/Male-and-female-business-associates-discussing-contra-assets-at-office-table-with-financial-data-and-tablet.jpg What Is a Contra Asset?

What Is a Contra Asset?

0 min read

A contra asset is a line item on a balance sheet, in its own account, that is either a credit balance or zero balance. A contra asset account offsets against another asset account. A normal asset has a debit balance and a contra asset nets against this to show the net balance of both assets. In some sense, a contra asset can be considered a negative asset.

The two most common contra accounts on a balance are accumulated depreciation and the allowance for doubtful debts. Accumulated depreciation tallies the depreciation to date of a fixed asset, while the allowance for doubtful debts contra account allows for some write offs of accounts receivable.

For example, if a business has accounts receivable of $50,000 and an allowance for doubtful debts account totaling $5,000, the net accounts receivable would be $45,000.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

How to Set up Contra Accounts

Setting up a contra account is an easy way to show amounts…

Read more

Recording an Accounting Impairment Loss in Your Business

If one of your company’s fixed assets drastically lost value, you might…

Read more

What Are Asset Classes?

Asset classes are depreciation categories used by the Canada Revenue Agency. When…

Read more