What is a contra asset example?
What is a contra asset example?
Key examples of contra asset accounts include allowance for doubtful accounts and accumulated depreciation. Allowance for doubtful accounts reduce accounts receivable, while accumulated deprecation is used to reduce the value of a fixed asset.
Is unearned revenue a contra account?
Unearned revenue, also known as deferred income or prepaid earnings, is not a contra revenue account with a debit balance presented on an income statement, but rather a liability with a credit balance reported on a balance sheet.
What is contra current asset?
In bookkeeping, a contra asset account is an asset account in which the natural balance of the account will either be a zero or a credit (negative) balance. The account offsets the balance in the respective asset account that it is paired with on the balance sheet.
How do you record contra revenue?
Contra accounts are reported on the same financial statement as the associated account. Contra revenue accounts include sales discounts, sales returns, and sales allowances, which all by nature have a debit balance, contrary to revenues. This should always match net income calculated on the income statement.
What are the two contra revenue accounts?
Two examples of contra revenue accounts are: Sales Returns and Allowances. Sales Discounts.
What is contra revenue?
Contra revenue is a deduction from the gross revenue reported by a business, which results in net revenue. Contra revenue transactions are recorded in one or more contra revenue accounts, which usually have a debit balance (as opposed to the credit balance in the typical revenue account).
Is petty cash a contra asset?
The transfer of cash from one account to another is also considered as a contra entry. Contra Entries relate to the following account: Petty Cash. Cash on Hand.
What happens when unearned revenue is earned?
Accounting for Unearned Revenue As a company earns the revenue, it reduces the balance in the unearned revenue account (with a debit) and increases the balance in the revenue account (with a credit). The unearned revenue account is usually classified as a current liability on the balance sheet.
Is unearned revenue an asset?
Because the business has been paid but no product or service has been rendered, unearned revenue is considered a liability. The liability converts to an asset over time as the business delivers the product or service.
What is a negative asset on the balance sheet?
Negative Net Assets If the value of all assets is higher than the dollar value of liabilities, the business will have positive net assets. If total assets are less than total liabilities, the business has negative net assets.
