Contra-accounts are accounts that offset the balance of another account. They always have opposite balances to the account they offset, meaning that they reduce the balance of the original account. For example, the contra-account to accounts receivable is allowance for doubtful accounts, which reduces the net value of accounts receivable.

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Contra-Accounts

Question 60

Multiple Choice

Contra-accounts:

A) are used to increase the original value of the account they offset.
B) always appear in the same column of the trial balance as the account they offset.
C) always reduce the account they offset.
D) are not allowed according to GAAP.

Correct Answer: