A contra account is an account that offsets another account, carrying an opposite balance to reduce the gross value of a related asset, liability or revenue.
A contra account pairs with a main account and moves in the opposite direction to reduce it. The most common is accumulated depreciation (contra to fixed assets), but others include the allowance for doubtful accounts (contra to accounts receivable) and sales returns and allowances (contra to revenue).
Contra accounts preserve useful detail: rather than netting figures away, they show both the gross amount and the reduction, so readers can see, for example, total receivables and the portion expected to go uncollected. This transparency is why contra accounts are standard in proper double-entry books.
Accounts receivable shows $100,000, but an allowance for doubtful accounts (a contra account) of $6,000 reduces it to a net $94,000 expected to be collected, showing both figures rather than just the net.
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