Contra Revenue Account On Income Statement

Contra revenue account an account that is offset against a revenue account on the income statement.

Contra revenue account on income statement. Sales returns is a contra revenue account as the figure is a negative amount net against total sales revenue. The account is normally a debit balance and in use is offset against the revenue account which is normally a credit balance. The income statement could simply report the net amount of the expense which. 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 there are three commonly used contra revenue accounts which are.

In other words its expected balance is contrary to or opposite of the usual credit balance in a revenue account. View acct 301 test 3 notes docx from acct 301 at san francisco state university. Income statement extract showing contra revenue account. Definition of contra revenue account a contra revenue account is a revenue account that is expected to have a debit balance instead of the usual credit balance.

At this point you have closed the revenue and expense accounts into income summary. Company k s income statement will report the gross sales of. The effect of contra revenue in income statements provides accurate financial information of the company. A contra expense account is a general ledger expense account that is expected to have a credit balance instead of the usual debit balance.

It should income summary should match net income from the income statement. In the above method we debit the contra revenue account in the trading account but generally the company uses the first method of accounting of contra revenue. A false contra revenue accounts such as sales returns appear on the income statement b false because sales discounts decrease the amount of sales by discounting on the dollar value sold. The sales discounts contra revenue account records the discounts given to customers on sales made to them normally a cash or settlement discount.

In other words the account s credit balance is contrary to or opposite of the usual debit balance for an expense account. A contra revenue account is one that oppose the normal balance of a relative income account such as sales returns and allowances and sales discount. The balance in income summary now represents 37 100 credit 28 010 debit or 9 090 credit balance does that number seem familiar. C false operating expenses are those that are incurred because of regular business operation.