Contra Revenue Accounts Definition

A contra revenue account needs while the bookkeeper is preparing some important statements about finances.

Contra revenue accounts definition. Understanding contra accounts. Accounting of contra revenue is very complicated as the same is increased accounting work. Contra asset account for example depreciation allowance for doubtful debts. Contra revenues account definition and meaning.

However one should always remember that the contra revenue account must be analyzed not separately but together with the revenue account to see and to calculate the difference between these two accounts. The income statement account sales returns and allowances is a contra revenue account that is associated with the revenue account sales. There are three commonly used contra revenue accounts. 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.

Contra equity account for example owner s drawings account treasury stock account. It adversely affects many accounts such as cash account if the company sells the goods on cash debtors account if the company sells the goods on credit stock account and sales account as the same as reversed. This use of sales returns and allowances. Contra accounts are reported on the same financial statement as the associated account.

For example a contra account to accounts receivable is a contra asset account. Contra revenue accounts are commonly encountered however a business can also have other forms of contra accounts including. Sales returns is a contra revenue account as the figure is a negative amount net against total sales 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 there are three commonly used contra revenue accounts which are.

Contra asset accounts are a type of asset account where the account balance may either be a negative or zero balance. Knowing the balance between gross revenue and net revenue and the cause of difference will surely benefit your business. A contra revenue account is a revenue account that is expected to have a debit balance instead of the usual credit balance. Contra revenue is a deduction from gross revenue which results in net revenue.

In other words its expected balance is contrary to or opposite of the usual credit balance in a revenue account. The contra revenue account.