A contra asset account is an asset account where the account balance is a credit

balance. It is described as "contra" because having a credit balance in an asset

account is contrary to the normal or expected debit balance. (A debit balance in
a contra asset account will violate the cost principle.)

A contra asset is a negative asset account that offsets the asset account with which it is

paired. The purpose of a contra asset account is to store a reserve that reduces the balance in
the paired account. ... Contra assets may be stated in separate line items on the balance
sheet.

Contra accounts are reported on the same financial statement as the associated account. For
example, a contra account to accounts receivable is a contra asset account. This type of
account could be called the allowance for doubtful accounts or bad debt reserve.

Contra assets and contra liabilities are listed on a company's balance sheet and carry

balances opposite of their related accounts. Unlike regular assets and liabilities, contra
assets typically keep a credit balance and contra liabilities typically keep a debit balance.

Types of contra asset accounts

 Accumulated depreciation.
 Accumulated depletion.
 Obsolete inventory reserves.
 Allowance for doubtful accounts.
 Trade accounts receivable.
 Discount on notes receivable.

The most common contra asset account is Accumulated Depreciation. Accumulated

Depreciation is associated with property, plant and equipment (plant assets).
Accumulated Depreciation will be credited when Depreciation Expense is recorded. ... A
less common example of a contra asset account is Discount on Notes Receivable.
ACCRUAL BASIS – we will record our income when it is earned even though there is no money involved.