Define Contra Revenue Account

Sales returns is a contra revenue account as the figure is a negative amount net against total sales revenue.

Define contra revenue account. In other words its expected balance is contrary to or opposite of the usual credit balance in a revenue account. The opposite is true for a liability account. If an account has a debit balance e g for an asset a c then there will be a credit balance in a contra account. 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.

As an revenue account is normally a credit balance a contra revenue account will normally be a debit balance. There are three commonly used contra revenue accounts. The income statement account sales returns and allowances is a contra revenue account that is associated with the revenue account sales. In double entry bookkeeping terms a contra revenue account or contra sales account refers to an account which is offset against a revenue account.

A contra account is the opposite of the normal balance that is actually shown by a particular type of an account. The sales discount account represents the discount amount a company gives to customers as an incentive to purchase its products or services. 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 revenue is a deduction from gross revenue which results in net revenue.

If the balance in this contra account is a debit of 3 000 and the sales account has the expected credit balance of 400 000 the company s net sales are 397 000. A contra revenue account is a revenue account that is expected to have a debit balance instead of the usual credit balance. It would appear on the company s income statement in the revenue section. An account which is used to reduce or offset the value of an associated account is called a contra account.

Pc is an acronym for professional corporation business legal entity. Define contra revenue account. The contra revenue account. Contra revenue account is an account that is offset against a revenue account on the income statement.

Learn new accounting terms. 4 cs of credit are the four primary considerations that will affect a lenders decision to approve or decline your loan application. This use of sales returns and allowances. Define contra revenue account.

A contra revenue account allows a company to see the original amount sold and to also see the items.