11 Facts About Contra account

Similarly, the landlord would enter a credit in the rent income Contra account associated with the tenant and a debit for the bank Contra account where the cheque is deposited.

The basic principle is that the Contra account receiving benefit is debited, while the Contra account giving benefit is credited.

For instance, an increase in an asset Contra account is a debit.

An increase in a liability or an equity Contra account is a credit.

Each Contra account can be broken down further, to provide additional detail as necessary.

In simplistic terms, if Bob, Dave, and Roger owe the company money, the Accounts Receivable Contra account will contain a separate Contra account for Bob, and Dave and Roger.

Since this Contra account is an Asset, the increase is a debit.

An increase to the bank's asset Contra account is a debit.

The asset account above has been added to by a debit value X, i e the balance has increased by £X or $X.

For example, when a vehicle is purchased using cash, the asset Contra account "Vehicles" is debited and simultaneously the asset Contra account "Bank or Cash" is credited due to the payment for the vehicle using cash.

Such an Contra account is used for clarity rather than being a necessary part of GAAP .