In case the contra asset account is not listed in the balance sheet, it must be listed in the footnotes of the financial statement for the users to be informed. Both the asset and the corresponding contra asset accounts must be stated clearly in the balance sheet. Usually, the asset account is listed first, and its contra asset counterpart is listed underneath, with the asset’s net value or book value. Note that in accounting, the term “book value” is also used interchangeably with net value. Therefore, the book value of an asset in the books is equal to its historical cost (the debit balance of the asset) minus the related amount of contra asset in the balance sheet (the credit balance of the contra asset).
In bookkeeping terms, a contra asset account refers to an account which is offset against an asset account. Learn why contra accounts, when utilized correctly along with a paired account, are a crucial component of accurate accounting and financial review. Note that the asset account balance represents the purchase price of the asset in question, also known as its historical cost.
Definition and Examples of Contra Assets
Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University. Examples of deferred unearned revenue include prepaid subscriptions, rent, http://www.micq.org/index.shtml.en insurance or professional service fees. For the past 52 years, Harold Averkamp (CPA, MBA) hasworked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online.
This requirement also comes from the accounting standard for inventories. Allowance for receivables is an account that companies maintain to record possible bad debts. However, this account does not represent actual irrecoverable debts. Accumulated amortization is an account similar to accumulated depreciation. https://www.marsexx.ru/psychology/fromm-revolucia.html This account only relates to a company’s intangible assets rather than tangible. For example, when depreciating an asset, the accumulated depreciation account is used to reduce the book value of the asset while also keeping track of the total amount of depreciation that has been posted to date.
What are the types of Contra Asset Accounts?
QuickBooks Online has different interphase and features compared to QuickBooks Desktop. Moving forward, follow the steps below for the complete process of an account set up in the QuickBooks Desktop version. The product we get is written by computer people who have no clue https://iqk520.com/the-role-of-steady-enchancment-groups-in-lean-future-state-implementation.html what accounting is, further, there appears to be no input from CPA’s and Accountants. Setting up a Cost of Services (COG) account that will decrease Gross Sales and result in lower Net Revenue / Net Sales on the P&L is similarly to how the photos above depict the steps.
