A contra account is an account used in the general ledger to reduce the value of a linked account.
They are useful for maintaining historical value in the main account when presenting a reduction or write-off on a separate contra account that corresponds to the current book value.
Contra accounts are presented on the same financial statement as the associated account, usually appearing directly below it with a third line for the net amount.
Please note that accountants use contra accounts rather than reducing the value of the original account directly to keep financial records clean.
Key examples of contra accounts include accumulated depreciation and allowance for doubtful accounts.
Accountability is the acceptance of responsibility for one’s actions. This implies a willingness to be transparent, allowing others to observe and evaluate their work.
Accounting policies are the procedures a company uses to prepare financial statements. Unlike accounting principles, which are rules, accounting policies are the standard for following those rules.
Acquisition accounting is a set of formal guidelines describing how the acquirer should report the assets, liabilities, non-controlling interests and goodwill of the acquired company.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.