What is a contra account? How do revenue contra accounts, specifically, differ from expense accounts?

Expert Solution

What is Contra Account?

A contra account is offset the balance of another account.
Transaction made to contra account presented under the on a compnay's financial statement under the related account.
Sometimes balance in the two accounts merged for the presentaion purposes, so that only a net amount is presented.
If the related account is asset account, then a contra asset account is used to offset it with a credit balance.
If the related account is liability account, then a contra liability account is used to offset it with debit balance.
Thus, the natural balance of a contra account is always the opposite of the account with which it is paired.

How do revenue contra accounts, specifically, differ from expense accounts?

In a company's financial records, contra - revenues and expenses produce same ultimate result : They both reduce net income.
The differance is that expenses represnt money that flows out of a company as it does business, while contra revenues represnt money that never comes in, or that comes in but turns around and goes right back where it come from.

ekkarill92 answered 2 years ago

a) What is a contra account? Give one example of a contra account. b) How may...

a) What is a contra account? Give one example of a contra account. b) How may financial statements assist the users of the financial statements?

The following accounts illustrate adjusting entries, identify the contra account: Adjustment in supplies. Accumulated Depretiation expense...

The following accounts illustrate adjusting entries, identify the contra account: Adjustment in supplies. Accumulated Depretiation expense Pre-Paid Insurance Accumulated Depretiation, Equipment

Explain the purpose of a "contra account" and provide an example of how the two accounts...

Explain the purpose of a "contra account" and provide an example of how the two accounts work in conjunction with one another.

TRUE OR FALSE? Allowance for Doubtful Accounts is a contra asset account.

TRUE OR FALSE?Allowance for Doubtful Accounts is a contra asset account.A factor purchases receivables from businesses for a fee and collects the directly from customers.A note is dishonored when it is not fully paid at maturity.All plant assets (fixed assets) must be depreciated for accounting purposesRecording depreciation on plant assets affects the balance sheet and the income statement.Current liabilities are typically expected to be paid within one year.A note payable must always be paid before an account payable.A debenture bond...

A contra asset represents A. an account such as Allowance for Doubtful Accounts which reflects a...

A contra asset represents A. an account such as Allowance for Doubtful Accounts which reflects a decline in the net realizable value of accounts receivable. B. an account that is presented as a credit balance in the asset section of the balance sheet. C. an account such as Accumulated Depreciation. D. all of the above. Under the allowance method of accounting for uncollectible accounts receivable, an actual write-off is recorded as A. a debit to Allowance for Doubtful Accounts and a...

What is felon disenfranchisement? How do these policies differ across states (specifically, who is disenfranchised in...

What is felon disenfranchisement? How do these policies differ across states (specifically, who is disenfranchised in different states)? What are the implications of these policies for our democratic political system?

Aging of Receivables; Estimating The contra asset account for accounts receivable.Allowance for Doubtful Accounts Trophy Fish...

Aging of Receivables; Estimating The contra asset account for accounts receivable.Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The A claim against the customer created by selling merchandise or services on credit.accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y7: Not Days Past Due Past Customer Balance Due...

What kind of accounts are the following (asset, liability, SE, revenue, expense) and what are their...

What kind of accounts are the following (asset, liability, SE, revenue, expense) and what are their normal balances. Also which specific type of assets, liabilities, or expenses do these fall under on the financial statements?

What effect does expense recognition have on the accounting equation? Specifically what accounts in the equation...

What effect does expense recognition have on the accounting equation? Specifically what accounts in the equation are affected by recognizing expenses under the accrual basis?

Question 20 2.5 pts Merchandise Inventory is what type of account? Liability Expense Asset Contra-Asset Flag...

Question 20 2.5 pts Merchandise Inventory is what type of account? Liability Expense Asset Contra-Asset Flag this Question Question 21 2.5 pts Returned merchandise for credit on account. The perpetual inventory system is in use. This will be recorded with: a debit to an asset and a credit to a liability. a debit to an asset and a credit to an expense. a debit to a liability and a credit to an expense. a debit to a liability and a...

Question