The accumulated depreciation account appears on the balance sheet and reduces the gross amount of fixed assets. Examples of fixed assets include buildings, machinery, office equipment, furniture, vehicles, etc. Contra Asset – Accumulated DepreciationĪccumulated depreciation is a contra asset account used to record the amount of depreciation to date on a fixed asset. Now let’s focus our attention on the two most common contra assets – accumulated depreciation and allowance for doubtful accounts. Contra asset accounts allow users to see how much of an asset was written off, its remaining useful life, and the value of the asset. For example, if a company just reported equipment at its net amount, users would not be able to observe the purchase price, the amount of depreciation attributed to that equipment, and the remaining useful life. Reasons to Show Contra Accounts on the Balance Sheetīy reporting contra asset accounts on the balance sheet, users of financial statements can learn more about the assets of a company. Offsetting the asset account with its respective contra asset account shows the net balance of that asset.Ĭommon examples of contra assets include: Therefore, a contra asset can be regarded as a negative asset account. Normal asset accounts have a debit balance, while contra asset accounts are in a credit balance. The account offsets the balance in the respective asset account that it is paired with on the balance sheet. In bookkeeping, a contra asset account is an asset account in which the natural balance of the account will either be a zero or a credit (negative) balance.
Updated FebruWhat is a Contra Asset Account?