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Anonymous
Not applicable

Balance a contra account

 
1 REPLY 1
RaymondJayO
Moderator

Balance a contra account

Thanks for taking the time to post here in the Community, @Anonymous. 

 

I'll share some information about balancing your contra account. 

 

A contra account offsets the balance in another account, such as A/R and A/P. If the account is an asset account, you can use a contra asset account to offset it with a credit balance. If it's a liability account, then a contra liability account is used to offset it with a debit balance. The natural balance of a contra account is always the opposite of the paired account. 

 

I'd still suggest consulting your accountant before performing any of following options about balancing your contra account. . This way, he/she can ensure your books will be accurate. 

 

If you're referring to an invoice that becomes non-collectible, you'll need to write it off and declare it as a bad debt. This way, you can clear the invoice out of your A/R account. It also reduces your net profit by its amount. You'll need to first review the Accounts Receivable Ageing Detail report: 

 

  1. Go to Reports from the left menu. 
  2. In the Search bar, enter Accounts Receivable Ageing Detail. 
  3. Choose the Accounts Receivable Ageing Detail report. 
  4. Review your outstanding accounts receivable on the report. 

 

Then, you'll need to create an account for bad debts: 

 

  1. Go to the Gear icon at the upper right. 
  2. Select Chart of Accounts under Your Company
  3. Choose New.
  4. In the Account dialog, select Expenses from the Account Type drop-down list. 
  5. From the Detail Type drop-down list, choose Bad Debts.
  6. In the Name field, enter Bad Debt.
  7. Click Save and close.

 

For the third to the last steps, you can go through this helpful article: How To Write Off Bad Debt

 

For your A/P account, you can use the Accounts Payable Ageing Detail before offsetting the balance of your A/P account. 

 

You can also set up a clearing account and use it by creating a journal entry. For more information, here's a great article you can refer to: Set Up A Clearing Account

 

The steps and resources above will help balance your contra account, @Anonymous. 

 

If you have follow-up concerns about this or should you need anything else, please drop me a line below. I'll be around to help.