Contra Account
What is a Contra Account?
A contra account is an account that balances on the opposite side to the typical balance in its class.
![ca1](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca1-1.jpg)
How it Works
Some asset, liability, and equity items lose value over time.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca2-1.jpg)
For example, a business may buy equipment.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca3-1.jpg)
They will pay a certain amount of money for the equipment.
![ca4](https://seeaccountingnow.online/wp-content/uploads/2021/06/ca4.jpg)
Wear and tear will reduce this value.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca5-1.jpg)
This loss of value is known as depreciation.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca6-1.jpg)
You need to show how this depreciation affects the asset’s value.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca7-1.jpg)
However, to do this, you don’t reduce the asset’s value directly.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca8-1.jpg)
Instead, you record the depreciation in an accumulated depreciation account.
![ca9](https://seeaccountingnow.online/wp-content/uploads/2021/06/ca9.jpg)
The accumulated depreciation account keeps track of accumulated depreciation.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca10-1.jpg)
The account is a separate account attached to the asset account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca11-1.jpg)
It is classified as a valuation account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca12-1.jpg)
By deducting accumulated depreciation, you can determine the asset’s current value.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca13-1.jpg)
It is also classified as a contra account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca14-1.jpg)
Contrary to other asset accounts, it balances on the credit side.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ca15-1.jpg)
© R.J. Hickman 2020