The contra liability account is less common than the contra asset account. A contra asset account is not classified as an asset, since it does not represent long-term value, nor is it classified as a liability, since it does not represent a future obligation. Taken together, the asset account and contra asset account reveal the net amount of fixed assets still remaining. The fixed asset account contains the original acquisition cost of a number of fixed assets, while the contra account (accumulated depreciation) contains the sum total of all the depreciation expense that has been charged against those assets over time. The most common contra account is the accumulated depreciation account, which offsets the fixed asset account. Thus, the natural balance of a contra account is always the opposite of the account with which it is paired. If the related account is a liability account, then a contra liability account is used to offset it with a debit balance. If the related account is an asset account, then a contra asset account is used to offset it with a credit balance. ![]() ![]() Sometimes the balances in the two accounts are merged for presentation purposes, so that only a net amount is presented. ![]() Contra accounts appear in the financial statements directly below their paired accounts. A contra account offsets the balance in another, related account with which it is paired.
0 Comments
Leave a Reply. |