contra revenue account list

A customer returned $100 worth of items, claiming them to be defective. Note that the contra liability account has a positive balance , and the liability account normally has a credit balance. Hence, the book value of the liability will be the credit balance of the liability account minus the debit balance of its contra liability counterpart. Contra liability accounts are special accounts in the liabilities section of the balance sheet.

Car sales are typically under warranty for a set period of time and can be returned as a return on sales later on. Sales allowance – Allowances are recorded when products sell below the normal price for whatever reason. Sales allowances can occur if there is a discount on surplus inventory or a discount because of product defects. A company should have a policy not to return the goods sold and not provide sales rebates and discounts on products.

Closing Entries, Sales, Sales Returns & Allowances in Accounting

Settling of a liability requires an outflow of an economic resource mostly money, and these are shown in the balance of the company. DepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized.

What are the two contra revenue accounts?

Contra Revenue Account

Sales returns, sales allowance and sale discounts are different examples of contra revenue accounts. Contra accounts such as these have a debit balance and are deducted from the total amount of a company's revenue.

In response, the firm should decrease its accounts receivable and revenue balances. That is done by crediting accounts receivable by $100 and debiting the contra revenue account sales returns and allowances for $100. Hence, the company will have gross revenue or net sales equal to $9,900. The balance sheet will show a gross fixed assets value, a contra account value for accumulated depreciation, and a net value. All three values can be useful for investors depending on what they’re looking for.

Contra assets

Revenue does not show you how much your business actually has during a period. Profit shows you the amount your business gains or loses after you deduct expenses. To calculate your profit, or net income/loss, you must use your business’s revenue as a starting point. To find your profit, subtract your total expenses from your total revenue. Trade accounts receivable – Trade receivables are the amount owed by customers that have been billed but payment has not been made yet. Financial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period . The company should know the reasons for the increase in contra-revenue every month to save extra cost and time.

contra revenue account list