What is Contra account? Should it be negative every time?

A contra account is an account created to off set the transaction of its related another account. It is used to reduce the amount of its related account. As the main account may be a debit or credit account in nature, so its contra would be a credit or debit account. Creation of contra account makes financial accounting clean and transparent. Examples of contra accounts may be Accumulated depreciation, allowance for bad debts etc.

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What Is CONTRA account ? Should it be Negative every time ?

Ans:

Contra entry is an entry which is passed for the cash & bank  only. When ever any cash withdraw form bank or deposit the cash in Bank. or any inter bank transaction done.  On such time this kind of entry passed.

The entry should not be negative,If  it is negative in bank means its overdraft/ loan.

But some company are practicing this contra entry as adjustment entry for other transactions too.

contra account is an account which is created to keep the main account balance unchanged.

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I am apologies to answer this question because it's not my specialist field

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I agree with Mr . Saiyid answer

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Contra account is used to offset it with debit balance.. e.g. Accumulated depreciation, allowance for bad debts etc.... these contra account used to adjust the value of an asset

Hello Team,

A contra account is an account found in an account ledger that is used to reduce the value of a related account. Items recorded in the contra account are specifically designed to offset other transactions, and are recorded as the opposite type of entry. If a debit is recorded in a related account, the contra account record will be a credit. Contra accounts are used for several reasons. They can be used to correct previous accounting mistakes, to reduce the value of an asset that is depreciating or to allot for uncollectible bills. Examples of contra accounts include Allowance for Uncollectibles, a contra account to Accounts Receivable and Accumulated Depreciation, a contra account to Assets.

Accountants use contra accounts rather than reduce the value of the non-contra account directly in order to keep financial accounting records clean. If a contra account is not used, it can be difficult to determine historical costs, which can make tax preparation more difficult and time consuming.

When accounting for assets, the difference between the asset’s account balance and the contra account balance is referred to as the book value. The allowance method of accounting allows a company to estimate what to place in the contra account, while the percent of sales method assumes that the company will not be able to collect payment for a fixed percentage of goods or services that it has sold. Both methods can help a company understand what write offs may do to its bottom line.

Regards,

Saiyid