Why do Contra Accounts exist in accounts and bookkeeping?

What is the purpose of Contra Accounts in accounts and bookkeeping? And if so what is the real meaning?

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  • Don G
    Lv 7
    3 years ago
    Favourite answer

    Contra accounts are simply negative offsets to other accounts. As Allowance for Doubtful Accounts, which reduces the net value of Accounts Receivable. Or Reserve for Inventory Adjustments, Accumulated Depreciation.

  • 3 years ago

    A contra account is one which is offset against another account. So for example there are contra expense accounts such as purchase returns, contra revenue accounts such as sales returns and contra asset accounts such as accumulated depreciation.

  • ?
    Lv 7
    3 years ago

    If you could simply rub out your mistakes, there'd be no audit trail. A contra account allows corrections to be audited.

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