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Contra asset definition
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If the asset account had a credit balance or the CA account had a debit balance, this would indicate an error in the journal entries. Note that in accounting, the term “book value” is also used interchangeably with net value. Therefore, the book value of an asset in the books is equal to its historical cost minus the related amount of https://online-accounting.net/ in the balance sheet .
Therefore, it reduces the value of shareholders’ equity by the amount paid for those repurchased stocks. Home Depot reports net receivables and net property and equipment, implying that both are reduced by contra assets. We’ll need to dig into the footnotes to find out what the contra accounts are.
Why Is Depreciation Estimated?
Companies must bring the balance of the discount on bonds payable account to zero over the life of the bond, which is accomplished through amortization. The amount recorded in the discount on bonds payable account is amortized to interest expense over the life of the bond. Amortization of the discount on bonds payable account decreases its balance and increases the balance in the interest expense account.
Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. What Happens When Stock is Delisted When a company is out Contra Asset of compliance with an exchange, this is what can happen. Free Cash Flow The money left over after a company supports operations can be a snapshot of its financial health.
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The discount on bonds payable is a contra liability account. Contra liabilities are not seen on a balance sheet as often as contra assets. Discount on bonds payable is a result of a bond issued for less than the face value of the bond.
What Are the Different Types of Contra Accounts?
There are four key types of contra accounts—contra asset, contra liability, contra equity, and contra revenue. Contra assets decrease the balance of a fixed or capital asset, carrying a credit balance. Contra liabilities reduce liability accounts and carry a debit balance. Contra equity accounts carry a debit balance reduce equity accounts. Contra revenue accounts reduce revenue accounts and have a debit balance.
