Accounting & Bookkeeping & Small Business Forum

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WHAT IS A CONTRA REVENUE ACCOUNT AND HOW DOES IT WORK?

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Hi Glenda, I consider this a brief introduction on the subject. =) Contra accounts are a way to reduce the balance of an account and still preserve original figures for the financial statements. Sales Returns and Allowances, and Sales Discounts are contra revenue accounts that allow you to reflect original Sales (and arrive at net sales) on the Income Statement; the normal or natural balance of revenue is a credit, so the normal balance of a contra-revenue account is debit. In the same way there are contra asset accounts, like Accumulated Depreciation (Bal. Sheet), and contra liability accounts like Discount on Bonds Payable (also Bal. Sheet). While I hope this helps, you may want to search the Web for more info. ;o)